RELEASE: A More Effective AML Regime Puts Flexibility First
Across two letters, the bank groups said regulators should put “flexibility first,” letting banks focus resources on “the most urgent threats” while moving away from “check-the-box compliance” and addressing gaps in stablecoin secondary markets.
The banking and crypto industry letters point to a growing tension over how regulators should treat stablecoin activity after issuance without making issuers directly responsible for transactions they can’t monitor or control.
Charles d’Haussy, CEO of dYdX Foundation, said both letters leave out compliance tools already built into major stablecoins and used by DeFi platforms.
"What is missing from both submissions is a basic technical fact: AML monitoring in stablecoins does not stop at issuance,” d’Haussy told Decrypt.
Each USDC or USDT transfer runs through the issuer’s master smart contract, where freeze and blacklist controls “execute in real time,” d’Haussy said, adding that most leading DeFi platforms also screen trades on-chain. In his view, that makes the regulatory gap “narrower than either letter acknowledges.”
“The real enforcement problem is offshore exchanges and unhosted wallets operating outside FATF’s Travel Rule framework, not the compliant DeFi infrastructure that is already doing the work,” d’Haussy said.
Beyond the technical question of where monitoring happens, broader oversight could help stablecoin markets scale by “narrowing the gap” between crypto markets and traditional finance, Dominick John, analyst at Zeus Research, told Decrypt.
For decentralized finance firms, custodians, and exchanges, broader oversight could mean stronger KYC checks and transaction controls, with the upside being “clearer rules, stronger trust, bigger institutional flows,” he added.
