The Bank Policy Institute and The Clearing House have urged U.S. regulators to clarify stablecoin anti-money laundering (AML) rules, particularly for transactions after issuance. In joint comment letters made public Wednesday, the trade groups argued that most illicit activity occurs on secondary markets, making oversight critical. They recommended a flexible approach that focuses on high-risk threats rather than 'check-the-box compliance,' and warned that issuers may lack information on secondary market transactions. The letters follow similar warnings from crypto firms like Paradigm and Hyperliquid Policy Center, who said broad AML rules could push regulated stablecoins out of decentralized finance. Industry observers note that AML tools exist within stablecoin smart contracts, such as freeze and blacklist controls on USDC and USDT transfers. The debate highlights tensions over how to assign responsibility for post-issuance activity without overburdening issuers. Broader oversight could boost trust and institutional flows, but must address technical realities and offshore gaps.

Key facts

• Bank Policy Institute and The Clearing House urge flexible AML rules for stablecoin secondary markets.
• Most illicit stablecoin activity occurs after issuance, according to trade groups.
• Crypto firms warn broad AML rules could push regulated stablecoins out of DeFi.
• Existing smart contract controls like freeze functions already monitor stablecoin transfers.
• Debate centers on issuer responsibility for post-issuance transactions they cannot control.