However there is one association that stablecoins still share with the rest of the broader crypto landscape: their ongoing entanglement in financial fraud and crime. A report from the Financial Action Task Force (FATF) found that “most on-chain illicit activity now involves stablecoins.”
It’s against this backdrop that the U.S. Treasury has issued a request for comment (RFC) on how to address the crypto landscape’s risks for regulated financial institutions, particularly under the new GENIUS Act. With the window for responses closing next week (Oct. 17), the RFC offers a unique view for corporate leaders into how Washington views the frontier of crypto compliance.
The goal of the request for input on “Innovative Methods to Detect Illicit Activity Involving Digital Assets” is to map the contours of what is technologically and operationally feasible today, in order to tether regulation to real-world capabilities and constraints. For compliance officers, CFOs, CIOs, and other leaders, the RFC offers a kind of Rosetta Stone for deciphering where the Treasury Department anticipates crypto compliance is headed and where pain points may arise.
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The Treasury’s RFC is less a policymaking vehicle than a research instrument designed to elicit feedback on novel uses of application program interfaces (APIs), artificial intelligence (AI), digital identity verification, and use of blockchain technology and monitoring technologies to address the risks of stablecoins across the financial landscape.
APIs are the connective tissue by which compliance tooling, banks, wallet providers and regulatory endpoints might exchange data. Treasury wants feedback on how APIs may bond off-chain systems (banks, exchanges, custodians) with on-chain analytics engines or supervisory dashboards. The RFC asks about throughput, latency, data standardization and privacy considerations.
AI is the lens through which huge volumes of transactional data, on and off chain, can be scanned for patterns, anomalies or hidden networks. Treasury’s request asks specifically about how AI models might flag suspicious behavior, detect structural linkages across wallets, or surface illicit flows. It also probes practical concerns: model explainability, auditability, robustness to adversarial inputs, bias, and compute cost.
Digital identity verification lies at the crux of translating pseudonymous blockchains into accountable financial rails. The RFC invites comment on know your customer, digital identity schemes (e.g. verifiable credentials, zero-knowledge proofs, decentralized identity), and how identity tools might integrate with transactional logic. Treasury is especially interested in designs that balance accuracy, anti-fraud robustness, privacy protection and resilience to identity attacks.
And finally, blockchain monitoring and analytics refer to the tools that parse transaction graphs, cluster wallet addresses, and integrate off-chain metadata (e.g. exchange wallet tags, sanctions lists, heuristics). The RFC solicits ideas for hybrid systems that fuse on-chain observability with off-chain enrichment, and asks whether real-time scanning is feasible. It also probes how firms might employ advanced cryptographic techniques, oracles, privacy-preserving analytics, or smart-contract auditing.
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Taken together, the Treasury’s RFC offers instructive glimpses into how regulators envision the next generation of crypto compliance.
A formal comment submitted by the Federal Money Services Business Association (FedMSB) proposed three immediate actions.
The first, to standardize evidence exchange via a RegTech Evidence API for risk data sharing with minimal exposure. The second is to establish an AI “good-faith safe harbor” recognizing systems governed under NIST AI Risk Management Framework (RMF). The third is to enable privacy-preserving collaboration using cryptographic techniques (e.g., Private Set Intersection) for cross-institution data sharing.
FedMSB represents hundreds of regulated money service businesses, firms that sit at the edges of the financial system where both legitimate innovation and illicit activity frequently converge. Its letter positions these intermediaries as the “early-warning sensors” of the digital asset world. But instead of lobbying for lighter rules, the association makes a strikingly technocratic argument: that effective oversight now depends on shared technical standards, not simply more regulation.
For corporate compliance teams, this approach suggests a move toward what might be called “compliance as code.” Instead of emailing CSV files to regulators or maintaining duplicative internal dashboards, firms could push structured evidence and risk signals through a common, Treasury-endorsed schema. Each interaction would be verifiable, version-controlled and privacy-aware.
Whether or not Treasury adopts the association’s recommendations wholesale, the direction of travel is unmistakable. Compliance could become data-driven, privacy-preserving and continuously auditable.
