Aleo Comments on US Stablecoin Rulemaking for Customer Identity Programs

Comment Letter of the Aleo Network Foundation
Re: Permitted Payment Stablecoin Issuer Customer Identification Program Docket No. FINCEN-2026-0101
August 21, 2026

I. Introduction

The Aleo Network Foundation (ANF) is a 501(c)(4) organization that supports the development of the Aleo Network, the first Layer-1 blockchain with programmable privacy built into its infrastructure using zero-knowledge proof (ZKP) technology. ANF is not a stablecoin issuer. We submit these comments as an educational resource on privacy-preserving blockchain architecture and its implications for stablecoin regulation, consistent with our mission to inform how U.S. financial regulators approach questions of encryption, confidentiality, and compliance in on-chain payment systems.

The proposed rule establishes a sound baseline for customer identification programs across the range of entities that will become Permitted Payment Stablecoin Issuers (PPSIs) under the GENIUS Act. ANF's comments focus on a narrow but consequential question: whether the rule's verification provisions are drafted in a way that accommodates innovation in identity verification technology, including ZKP-based tools that are already operational. These comments respond specifically to the following questions from Section VI of the Notice of Proposed Rulemaking:

• Question 5: Should the regulatory text explicitly discuss digital identity solutions or verifiable credentials? How could it best do so given the range of tools available on the market?
• Question 6: What are the benefits and risks of using digital identity solutions or verifiable credentials as part of verifying customers' identities?
• Question 8: What, if anything, could be changed to make the proposed rule more conducive to industry innovation? Explain how any changes would positively or negatively impact PPSIs' expected operations and illicit finance risk to the U.S. financial system.

II. Technology-Neutral Verification Language Would Future-Proof the Rule Without Weakening It

The proposed rule's identity verification provisions at §1033.220(a)(2)(ii) allow PPSIs to verify customer identity through documentary or non-documentary methods and provide illustrative examples of each. The non-documentary examples — contacting a customer, comparing information against consumer reporting agencies or public databases, checking references with financial institutions, obtaining financial statements — reflect well-established practices designed for traditional financial infrastructure. They do not reflect the verification capabilities that ZKP technology now makes possible.

ZKP technology enables a fundamentally different verification model, one that is already operational and directly relevant to the stablecoin context. Under a ZKP-based approach, a customer can cryptographically prove that they satisfy a verification predicate — that they are a legal entity in good standing, that their taxpayer identification number has been validated, that they do not appear on a sanctions list — without transmitting the underlying personal data to the PPSI. The PPSI receives a verifiable proof rather than raw identifying information. The proof is mathematically sound and auditable.

This model satisfies the rule's core standard — that verification procedures "enable the permitted payment stablecoin issuer to form a reasonable belief that it knows the true identity of each customer" — as well as or better than the enumerated non-documentary methods. A cryptographic proof of verified identity attributes is more reliable than a comparison against a public database and more tamper-resistant than a reference check. It also reduces the PPSI's data custody burden, which itself reduces systemic risk: a PPSI that holds proofs rather than raw PII has less sensitive data to protect and less exposure in the event of a breach.

ANF does not suggest that the agencies enumerate ZKP-based verification as a named method in the regulatory text. The rapid pace of development in this space makes specific enumeration likely to become outdated quickly, and the agencies correctly note this concern in the preamble. Instead, ANF recommends that the agencies confirm — in guidance or in the preamble to the final rule — that the non-documentary verification methods described in §1033.220(a)(2)(ii)(B) are illustrative and non-exclusive, and that cryptographic verification tools that enable a PPSI to form a reasonable belief as to customer identity qualify under this provision. This confirmation would provide regulatory clarity for PPSIs considering ZKP-based onboarding tools without requiring the agencies to anticipate or endorse any specific technology. It would also reduce the illicit finance risk that attends excessive PII accumulation by giving PPSIs a compliance-compatible path to data minimization.

III. Conclusion

ANF appreciates the opportunity to comment on this proposed rule and commends the agencies for soliciting input on how the rule can be made more conducive to innovation. The clarification we recommend is narrow: confirm that outcome-based verification standards accommodate cryptographic tools that enable a PPSI to form a reasonable belief as to customer identity without requiring transmission of underlying personal data to the PPSI. This change does not weaken the rule's illicit finance safeguards. It would reduce barriers to adoption of verification infrastructure that is more protective of customer data and more resistant to the data-breach risks that attend conventional PII accumulation.

ANF welcomes further engagement with FinCEN, the OCC, the Federal Reserve, the FDIC, and the NCUA on these and related questions as the GENIUS Act regulatory framework continues to develop. We are available to provide technical briefings on ZKP architecture, privacy-preserving compliance tools, and their implications for BSA obligations at the agencies' convenience.

Respectfully submitted,

Yaya J. Fanusie
Global Head of Policy Aleo Network Foundation