On August 18, the U.S. Department of the Treasury issued a Request for Comment, inviting interested members of the public to provide input on innovative methods to detect and mitigate illicit finance risks involving digital assets. This initiative fulfills the GENIUS Act directive for the Secretary of the Treasury to seek public comment on methods to detect illicit activity involving digital assets, complements the January 23, 2025 Executive Order 14178 on “Strengthening American Leadership in Digital Financial Technology” to promote responsible digital asset growth and U.S. leadership in digital finance, and aligns with the July 30, 2025 report from the President’s Working Group on Digital Assets advocating enhanced anti-money laundering/countering the financing of terrorism (AML/CFT) measures through public-private collaboration. In conjunction with the SEC’s “Project Crypto,” this Request for Comment bolsters the Administration’s commitment to fostering responsible innovation in digital finance while addressing potential risks and misuses by illicit actors.
A Framework for Enhanced Detection
The Request for Comment seeks to identify innovative methods that financial institutions currently use or could use to detect illicit activities, such as money laundering, involving digital assets. The GENIUS Act lists four technologies for which The Department of Treasury should seek public comment: application program interfaces (APIs); artificial intelligence (AI) systems to analyze transactional data and uncover complex illicit networks; digital identity verification mechanisms; and blockchain monitoring tools that integrate on-chain and off-chain data to trace activities.
APIs serve as system access points or library functions that enable different software applications to communicate, including those used for AML/CFT and sanctions compliance. APIs facilitate automatic data sharing, access to transaction details, strict access controls, transaction monitoring, and enhanced security for institutions handling digital assets.
AI, in this Request for Comment, means a “machine-based system that can, for a given set of human-defined objectives, make predictions, recommendations, or decisions influencing real or virtual environments.” Financial institutions are using AI to help analyze significant amounts of data and to better identify illicit finance patterns, risks, trends, and typologies in money laundering.
Digital Identity Verification, or identity proofing, involves confirming a person’s claimed identity in a digital setting. The Department of Treasury recognizes industry efforts to create portable digital credentials that aid AML/CFT compliance, protect user privacy, and ease burdens on institutions, incorporating elements like government IDs or biometrics for uses such as onboarding or automated checks in DeFi smart contracts.
Blockchain Technology and Monitoring leverage the public ledgers of many digital assets, allowing observation and analysis of pseudonymous transactions that are on the blockchain’s public ledger. Both the U.S. government and financial institutions use blockchain analytics to trace illicit activity, evaluate risks, analyze cross-chain transactions, and detect patterns signaling potential illegal dealings.
The Department of Treasury encourages commenters to help identify innovative or novel methods that regulated financial institutions can use to detect and mitigate illicit finance risks involving digital assets. For each method discussed in a comment, feedback is sought to address factors such as detection improvements, costs, data sensitivity, privacy risks, operational challenges, cybersecurity risks, and overall effectiveness of the methods or strategies used to mitigate illicit finance.
Implications and Next Steps for Businesses and Investors
To improve compliance and safeguard against fraud and sanctions evasion, this Request for Comment is essential for stakeholders in the digital asset ecosystem. Newer techniques such as AI analytics and blockchain monitoring could help improve the transparency of transactions, in turn increasing investor confidence. The adoption of portable digital identity solutions could enable easy access to DeFi and stablecoin platforms, aligning with “Project Crypto’s” aims of integrating advanced technologies into the U.S. financial system and encouraging institutional involvement and sustainable economic growth.
As provided in Section 9(a) of the GENIUS Act, comments are due by October 17, 2025, via the Federal eRulemaking Portal at www.regulations.gov. The Department of Treasury will review submissions, conduct additional research, and submit a report to the Senate Banking and House Financial Services Committees with legislative and regulatory proposals in collaboration with other agencies, including FinCEN and the SEC. Successful implementation could empower the U.S. regulatory framework to support tokenization, DeFi, and stablecoins, emphasizing security, efficiency, and U.S. leadership in global financial technology.
