The Federal Deposit Insurance Corporation (FDIC) has unveiled a proposed regulatory framework aiming to extend Bank Secrecy Act (BSA) compliance to Permitted Payment Stablecoin Issuers (PPSIs) under its supervision. This initiative seeks to integrate digital asset issuers fully into the established anti-money laundering (AML) and counter-financing of terrorism (CFT) standards long applied to traditional financial institutions.

Under the new proposal, PPSIs would need to implement rigorous AML programs consistent with those required by the Financial Crimes Enforcement Network (FinCEN) and economic sanctions programs issued by the Office of Foreign Assets Control (OFAC). Among the mandated measures are internal controls, appointment of a compliance officer, staff training programs, independent audits, customer identification protocols, suspicious activity reporting, and monitoring of on-chain transactions.

This move builds on an earlier FDIC proposal that set prudential standards for PPSIs concerning their reserve assets, redemption rights, capital requirements, and risk management practices. By formally designating PPSIs as financial institutions under the BSA, the FDIC aims to close regulatory gaps surrounding stablecoin issuance, enhancing oversight and consumer protection in the growing digital payments market.

Supervisory enforcement would involve coordination between the FDIC and FinCEN. The FDIC must inform FinCEN at least 30 days before taking any formal action related to a PPSI’s AML/CFT compliance. Nevertheless, the FDIC indicates that issuers with robust AML programs would generally avoid enforcement unless they exhibit significant or systemic failures to meet the requirements.

PPSIs fall under the authorization framework provided by the Guiding and Establishing National Innovation for US Stablecoins Act (GENIUS Act). They operate as subsidiaries of FDIC-insured State nonmember banks or savings associations and are poised to become more tightly regulated as they expand.

The FDIC has opened a public comment period, lasting 60 days from the rule’s publication date, during which stakeholders can provide feedback before the final rule is adopted later this year. The agency expects that only a limited number of PPSIs, likely fewer than thirty, will seek FDIC approval initially. Many are anticipated to leverage their parent banks’ existing AML systems, which should keep incremental compliance costs manageable.