The U.S. Department of the Treasury Launches Public Consultation on the 'GENIUS Act' to Explore Digital Identity Verification in DeFi Smart Contracts

Washington, August 17, 2025 — The U.S. Department of the Treasury announced today the formal launch of a public consultation under the 'GENIUS Act' (Global Empowerment of Novel Identities for Universal Security Act) to explore the integration of digital identity verification tools in decentralized finance (DeFi) smart contracts to combat illegal financial activities. This consultation aims to gather public and industry feedback to develop stricter regulatory frameworks for the DeFi ecosystem. According to the proposal, the Treasury plans to implement automated KYC (Know Your Customer) and AML (Anti-Money Laundering) checks on the blockchain through API interfaces to enhance transaction transparency and curb illegal capital flows. Additionally, the proposal suggests introducing biometric technology to reduce compliance costs for DeFi platforms while ensuring the security and efficiency of user identity verification. Meanwhile, U.S. banking industry groups have expressed concerns about the regulatory provisions regarding stablecoins in the proposal. They warn that if there are loopholes in the regulation of stablecoin interest payments, it could lead to outflows of bank deposits of up to $6.6 trillion, thereby impacting the traditional financial system. Industry experts are calling for a balance between innovation and financial stability in regulatory design. The public consultation will continue until October 17, 2025, and the Treasury encourages relevant stakeholders to submit their opinions to jointly shape the future direction of DeFi regulation.