The US Department of Treasury is demanding public response to how digital identity tools and other emerging technologies can be used to fight illegal finance in crypto markets, with an alternative decentralized finance (DEFI) is embedding an identity in smart contracts.
CounselingPublished this week, the newly enacted guide stems and establishes national innovation for the US Stabelins Act (Genius Act) signed in the law in July.
The Act, which determines a regulatory structure for the payment stablecoin issuers, instructs the Treasury to detect new compliance technologies, including the application programming interface (API), Artificial Intelligence, Digital Identification Verification and Blockchain Monitoring.
One of the ideas in the request for the comment has the ability to directly integrate digital identity credentials for the DEFI protocol in its code. Under this model, a smart contract can automatically verify the credibility of the user before executing transactions, effectively to construct security measures in blockchain infrastructure to their customer (KYC) and anti-mani laundering (AML).
Connected: Genius Act ‘Killer Apps’ and to spark the wave of new payment services: signum
Treasury: Digital ID can cut compliance costs
According to the Treasury, digital identification solutions, which may include government IDs, biometrics or portable credentials, can reduce compliance costs by strengthening privacy security.
They can also make it easier for financial institutions and DEFI services to detect the theft of restrictions before money laundering, terrorist financing, or transaction.
Treasury also accepted potential challenges, including the need to balance innovation with data privacy concerns and regulatory inspections. The agency wrote, “Treasury welcomes the input on any case that commentators believe that the treasury’s efforts are relevant.”
Public comments are open to October 17, 2025. After consultation, the Treasury will submit a report to the Congress and release guidance or proposes new rules based on findings.
Connected: The Genius Act can push trillions in the property of the yield ban tokens-the pre-bank execution
American banks have warned against Stabcoin Yield Loofol
Last week, several leading US banking groups led by the Bank Policy Institute (BPI) urged the Congress to tighten the rules under the Genius Act, warning that a flaws could allow stabeloin issuer to permission to bypass the restrictions on interest.
In a letter sent on Tuesday, the BPI stated that the differences may allow issuers to offer the intentions of the law, offer yields or involvement with associates. The group warned that the unruly growth of the produce-bearing stabelin could trigger to $ 6.6 trillion in the outflow from traditional banks, threatening credit access for businesses.
magazine: Genius Act near Bitcoin vs Stablecoins Shodown Looms
