Closing the Payment of Interest Loophole for Stablecoins (BPI)
The U.S. Bank Policy Institute (BPI), backed by several U.S. banking groups, implored Congress to close a loophole that could allow stablecoin holders to receive interest indirectly through affiliated exchanges, thereby evading the GENIUS Act’s ban on interest and yield. Because payment stablecoins neither fund loans like bank deposits nor operate as securities like money market funds, the BPI says they should not pay interest. They cite a Treasury estimate that up to $6.6 trillion of deposits could flow out of banks if stablecoins can offer yield, warning that such shifts would raise borrowing costs and reduce credit availability, especially during stress, unless the prohibition is extended to affiliates and distribution channels. [Read more at the BPI]
An Approach to Anti-Money Laundering (AML) Compliance for Crypto-Assets (BIS)
The Bank for International Settlements (BIS) published a Bulletin that proposes a practical AML/CFT framework for public blockchains that leverages transparent on-chain histories to compute “AML compliance scores” for crypto units and wallets, ranging from clean to tainted based on provenance, links to allow/deny lists, and risky patterns (e.g., mixers). Instead of relying on intermediaries as in traditional finance, authorities and off-ramps (fiat conversion points) would apply threshold-based acceptance rules to block or permit redemptions, with options spanning strict (only allow-listed/KYC’d flows) to lighter (exclude only deny-listed exposure), plus intermediate, tiered criteria like clean holding periods or limits by score. This approach aims to realign incentives—encouraging users, intermediaries, and stablecoin operators to avoid tainted flows—while enabling third-party compliance services, accommodating both UTXO- and account-based designs, and anticipating evasive tactics. It argues “same risk, same regulation” is insufficient for crypto’s unique structure, and that provenance-aware rules, coordinated internationally, can strengthen financial integrity and monetary sovereignty as crypto integrates with mainstream finance. [Read more at the BIS]
Upcoming Speaking Engagements:
The CB+DC Conference (Nassau, Bahamas, September 9-11) is a premier gathering centered on CBDCs, tokenized assets, and stablecoins. It provides a forum for central bankers, commercial bankers, technology innovators, policymakers, and academics to explore the latest advancements in digital currency, engage with experts and peers, and discuss the future of digital currency. [Register here but before you do, email me at john@kiffmeister.com for a 15% discount]
I produce a monthly digest of digital fiat currency (DFC) developments exclusively for the official sector (e.g., central banks, ministries of finance and international financial institution (e.g., the BIS, IMF, OECD, World Bank)) plus academics and firms that are active in the DFC space (commercial banks, technology providers, consultants, etc.). (DFCs include central bank digital currency (CBDC), stablecoins and tokenized deposits.) It goes out via email on the first business day of every month, and if you’re interested in being on the mailing list, please email me at john@kiffmeister.com.
