From Policy Ask to Policy Win: FinCEN Recognizes Digital Identity for Customer Verification

The Financial Crimes Enforcement Network (FinCEN) and the federal banking agencies have issued new guidance confirming that banks and credit unions may use government-issued verifiable digital credentials—including state-issued mobile driver’s licenses—to verify customers under the Customer Identification Program Rule.

This is an important modernization of federal financial-crime compliance and a direct response to a regulatory clarification The Digital Chamber has repeatedly requested.

Why This Guidance Was Needed

Financial institutions increasingly serve customers through mobile applications and other digital channels, but identity-verification practices often remain rooted in physical documents. Customers may be asked to photograph and upload a driver’s license, transmit sensitive personal information, or rely on authentication methods that are vulnerable to forgery and identity theft.

Mobile driver’s licenses and other verifiable digital credentials offer a more secure alternative. They use cryptographic signatures, device binding, authentication factors, and other safeguards to help institutions determine whether a credential is authentic and belongs to the person presenting it.

Until now, however, regulatory uncertainty limited adoption. Financial institutions needed clear confirmation that these credentials could be used consistently with existing Bank Secrecy Act and Customer Identification Program obligations.

From an Ask to a Win

TDC made that clarification a specific policy priority.

In our comments on Bank Secrecy Act modernization, permitted payment stablecoin issuer requirements, and NIST’s mobile driver’s license implementation guidance, TDC urged regulators to recognize privacy-preserving digital identity and verifiable credentials as legitimate compliance tools.

In May, we publicly called on FinCEN to issue clear guidance explaining how financial institutions could use mobile driver’s licenses and other digital credentials to satisfy BSA and Customer Identification Program requirements. FinCEN has now answered that request.

The new FAQs confirm that an unexpired government-issued verifiable digital credential can qualify as “government-issued identification” under the documentary verification provisions of the Customer Identification Program Rule, provided it contains the required information and the institution has the technology, policies, and procedures necessary to use it.

The guidance also confirms that these credentials may be used when customers open accounts in person, remotely over the internet, or through another digital or virtual channel. In addition, electronic credentials issued by nongovernmental entities may also be used as a non-documentary verification method when the institution ensures an appropriate level of authentication.

Why It Matters

This guidance gives regulated institutions greater confidence to adopt stronger identity technology without waiting for Congress or regulators to rewrite the underlying rule.

Properly implemented, verifiable digital credentials can:

  • Make forged or altered identity documents easier to detect
  • Strengthen remote customer onboarding
  • Reduce dependence on easily copied physical documents
  • Prevent new fraud tactics made widely available by AI
  • Limit unnecessary collection and storage of sensitive information
  • Improve the customer experience while supporting effective compliance

The FAQs do not require institutions to accept digital credentials or create new supervisory expectations. Institutions must still form a reasonable belief that they know a customer’s true identity, address signs of fraud, and incorporate any credential into a compliant risk-based program.

That flexibility is a strength. It allows financial institutions to adopt better tools while preserving responsibility for effective identity verification.

This is how sustained policy engagement produces results: identify a barrier, develop a workable recommendation, place it consistently before the right agencies, and secure clear federal guidance.

TDC thanks FinCEN and the federal banking agencies for recognizing that modern technology can advance compliance, cybersecurity, innovation, and consumer privacy at the same time.

Read the new FinCEN FAQs

Decoding Digital Assets: Empowering Policymakers with Tax Facts 

Digital assets are transforming the global economy at lightning speed. Regulators and lawmakers are actively trying to understand these mechanics to establish tax rules of the road, most recently in market structure legislation awaiting the U.S. Senate’s consideration.  

To secure U.S. leadership in digital assets for generations to come, we must address the burdensome nature of the current tax code on companies and consumers, and find a path to tax parity with traditional assets. We must resolve technical ambiguities regarding the timing and sourcing of staking rewards and push back against disproportionate compliance burdens like reward bifurcation.  

Finally, we will ensure that new rules, such as de minimis exceptions, thoughtfully address real-world administrability concerns. By tackling these issues head-on during the upcoming markup and beyond, we will foster domestic capital formation and build a tax code that supports industry growth. 

Advancing Tax Clarity

TDC has worked with the House Ways and Means Committee throughout the current legislative effort to help understand the technology and what kind of tax framework makes sense for consumers and the industry. 

  • In May, we outlined key pillars for a digital asset tax framework in a letter to the committee and reinforced those priorities in a formal statement for the record for June’s hearing. We have also shared technical analysis with legislators on the digital asset taxation legislative package. 
  • Direct Advocacy: Beyond formal submissions, we met directly with the vast majority of Ways and Means offices to advocate for comprehensive, bipartisan solutions conducting over 70 meetings that span more than 50 hours of direct engagement. 
  • Educational Roundtables: We have hosted 7 educational roundtables as part of our ongoing series, providing staffers with the insights needed to navigate this evolving landscape and creating a safe space for deeper questions about the causes and effects of the current U.S. tax structure. 
  • Bicameral Focus: Alongside these House engagements, our advocacy and education efforts in the Senate remain highly active. 

Whether through one-on-one briefings, educational roundtables, or technical documents on high-impact issues like staking, TDC provides lawmakers with an open line to industry experts so they can understand the technology they regulate. Our commitment and engagement ensures that every policy maker can make sound decisions for their constituents and the industry. 

What’s Next  

With the House Ways and Means Committee expected to mark up a digital asset tax package this September, we must maintain engagement to replace ambiguity with statutory certainty to boost tax compliance, protect retail investors, and secure U.S. leadership. 

TDC’s Wins on Bank Secrecy Act Modernization 

The Digital Chamber is directly impacting the rules taking shape in agencies implementing the GENIUS Act.

On June 22, FinCEN and the federal banking regulators proposed new Customer Identification Program (CIP) requirements for permitted payment stablecoin issuers (PPSIs). The proposal is the latest in a series of rulemakings implementing the GENIUS Act and would establish how stablecoin issuers identify and verify customers.

TDC directly impacted how the proposal has improved, as several provisions reflect policy recommendations from our earlier comments to FinCEN, OFAC, OCC, FDIC, and NCUA.

For example, TDC submitted extensive comments in June responding to FinCEN’s initial PPSI AML/CFT rulemaking and its broader BSA modernization proposal. A central theme of those submissions was that financial-crime obligations should follow the activities an entity actually performs.

  • TDC argued that a stablecoin issuer should have BSA obligations when it directly serves a customer — for example, through issuance, redemption, custody, exchange, or transfer services — but should not be responsible for every downstream transaction simply because it issued the stablecoin being used.
  • We also strongly urged FinCEN to preserve the distinction between financial intermediaries and technology providers. Developers, non-custodial software providers, node operators, APIs, and other neutral infrastructure should not be treated as financial institutions when they don’t accept or transmit value, nor exercise custody or control over customer assets.
  • Finally, TDC encouraged FinCEN to modernize compliance by embracing privacy-preserving digital identity, verifiable credentials, blockchain analytics, AI, and other emerging Regulatory Technology tools.

Wins for Privacy and Safety

The new CIP proposal reflects significant movement toward that framework.

Most importantly, the Agencies propose limiting CIP information collection to primary-market customers who interact directly with the issuer, rather than attempting to impose CIP on secondary-market users. The proposal recognizes that issuers generally lack the customer information needed to identify downstream users and accordingly narrows the proposed customer definition.

The proposal also contains vital protections for developers and decentralized infrastructure. Its definition of “digital asset service provider” excludes distributed-ledger protocols, developers of self-custodial software interfaces, validators and distributed-ledger operators, and certain peer-to-peer liquidity activity.

The proposal recognizes the potential of digital identity, including verifiable credentials such as state-issued mobile IDs and privacy-preserving credentials, and proposes a flexible, risk-based approach to their use.

These principles directly align with what TDC has been advocating for: regulating financial activity without inadvertently regulating the underlying technology and allowing regulated companies to use better technology to achieve stronger compliance outcomes.

Building on the Progress

TDC’s latest response asks agencies to provide greater clarity around account relationships, redemption-only customers, embedded-finance arrangements and third-party reliance, while expanding regulatory certainty for digital identity, blockchain analytics, ecosystem monitoring, AI-enabled compliance, cybersecurity tools, and other innovative compliance technologies.

There is still work to do before the rules are finalized, but we are encouraged by the latest updates and improvements. TDC’s engagement is inserting industry expertise into workable federal policy. The latest proposal demonstrates the value of sustained, technically detailed advocacy — and provides an important foundation for the next phase of GENIUS Act implementation.

Quantum-Proofing Bitcoin: Why BIP-360 and BIP-361 Can’t Wait

By: Ava Amelio

The Quantum Threat: And Why It Is Growing 

Bitcoin’s security rests on a simple promise: only the owner of a private key can spend the coins tied to it. A cryptographically relevant quantum computer, or CRQC, could break that promise by working backward from an exposed public key to the private key behind it. New research from Google Quantum AI cut the estimated hardware needed to pull this off by roughly 20x, down to fewer than 10,000 physical qubits.1 The same research puts nearly 7 million BTC, close to a third of the supply, in addresses where the public key is already out in the open and ready to attack.2 Two Bitcoin Improvement Proposals, BIP-360 and BIP-361, lay out how the network closes that gap. 

Why This Matters Now More Than Ever  

Bitcoin has no CEO who can push a patch. Every rule change needs miners, node operators, and users to separately choose to adopt it – a process that took years even for widely-supported upgrades like SegWit and Taproot. That slow clock is exactly why the runway needs to open now: the hardware estimates keep shrinking, but the migration path doesn’t get any shorter. A quantum attacker also doesn’t need to hit every wallet at once. One exposed key is enough, and nothing stops the attacker from sitting on stolen funds for months before moving them, timing the theft to avoid drawing notice from chain watchers.3 

  • BIP-360 introduces a new output type, Pay-to-Merkle-Root (P2MR), so newly minted coins never expose a raw public key in the first place. 
  • BIP-361 sets a public deadline for moving already-exposed coins to quantum-resistant addresses, after which the network stops honoring spends from the old, vulnerable signature types. 
  • Together, they cover both the coins Bitcoin hasn’t minted yet and the coins already sitting in the open. 

TDC’s View 

We recommend implementing both BIP-360 and BIP-361. Bitcoin’s coordination problem is also its risk-distribution problem: no central authority can force anyone to upgrade, so the burden of acting falls unevenly. Well-capitalized exchanges and miners can migrate on their own timeline. Retail holders and dormant accounts, including an estimated 1.7 million BTC in wallets whose owners are lost, dead, or simply gone, cannot act at all, no matter how much warning they get. Waiting for a crisis to force the industry’s hand doesn’t spread that exposure more fairly; instead, it leaves ordinary and absent holders exposed while everyone with the resources to move fast does exactly that. A public timeline is what makes the migration workable instead of a scramble, and it’s the best option the network has to protect the self-custody promise that makes Bitcoin worth defending. 

What Happens Next 

BIP-360 and BIP-361 are proposals, not settled code. They still need the community to build consensus, wallets and exchanges to support the new address types, and node operators to adopt the rules that enforce them. We will continue to track the process and keep members briefed as it moves through review, pressing the industry to treat this as a planning problem to solve now, rather than an emergency to manage later. 

The Corporate Alternative Minimum Tax (CAMT) The Digital Chamber & Digital Power Network’s Opposition

Last Updated: June 4, 2025

What is CAMT?

The Corporate Alternative Minimum Tax (CAMT), created by the Inflation Reduction Act of 2022, sets a 15% minimum tax for large corporations that earn more than $1 billion per year on average. Instead of relying on the traditional tax system, which allows companies to lower their taxable income through deductions and credits, the CAMT is based on the income they report to investors in their financial statements. This new system was designed to ensure that highly profitable companies can’t reduce their tax bills to near-zero using accounting strategies, and that they contribute a baseline amount in federal taxes each year.

How Did CAMT Come to Include Unrealized Crypto Gains?

In December 2023, the Financial Accounting Standards Board (FASB) updated its rules to require companies to report the fair market value of digital assets on their financial statements.

This shift means that unrealized gains and losses must now be reflected in a company’s reported income, even if those assets haven’t been sold. Because CAMT calculations are tied to this financial statement income, these paper gains can now trigger real tax obligations. As a result, companies with significant crypto holdings may find themselves liable for taxes on value they have not yet realized in cash, raising concerns about liquidity, fairness, and unintended consequences for digital asset innovation.

Who is Affected?

The intersection of CAMT and the new accounting standards primarily impacts large corporations with significant digital asset holdings. These companies may face substantial tax bills based on paper gains, without having liquidated the assets to generate cash. This scenario raises concerns about liquidity and financial planning, especially in volatile markets.

Legislative Response

Senators Lummis (R-WY) and Moreno (R-OH) have called on the Treasury to issue guidance that excludes unrealized crypto gains from CAMT calculations. They argue that taxing unrealized gains is inconsistent with traditional tax principles and could hinder innovation in the digital asset space. The senators suggest that the Treasury has the authority to adjust CAMT regulations to prevent unintended consequences and maintain a fair tax environment for U.S. companies.

Conclusion

The application of CAMT to unrealized cryptocurrency gains has sparked debate over tax fairness and economic competitiveness. As the Treasury considers potential adjustments, stakeholders await clarity on how digital assets will be treated under the evolving tax landscape.

The Digital Chamber and Digital Power Network oppose CAMT and urge for its swift repeal.

If you have any questions, please reach out to Policy@digitalchamber.org

Securing America’s Infrastructure: Blockchain Solutions for Cyber and Physical Threats

May 7, 2025  

By: Jean-Philippe Beaudet 

Advanced Persistent Threats (APTs) are covert cyber-attacks where an attacker gains access to a computer network and remains undetected for an extended period of time, either lying in wait to attack at an opportune time in the future or manipulating the network undetected in the background for months or years. 

According to the Joint Cybersecurity Advisory – an international consortium of intelligence and security organizations – the past few years have seen significant nation-state-backed cyber-attacks against the United States:  

  • Chinese-affiliated Volt Typhoon, “has compromised the IT environments of multiple critical infrastructure organizations – primarily in Communications, Energy, Transportation Systems, and Water and Wastewater Systems (WWS) sectors.”1 
  • “Russian state-sponsored APTs have used sophisticated cyber capabilities to target a variety of U.S. and international critical infrastructure organizations, including those in the Defense Industrial Base as well as the Healthcare and Public Health, Energy, Telecommunications, and Government Facilities Sectors.”2 
  • “[Iranian Revolutionary Guard Corps]-affiliated APTs are actively targeting programmable logic controllers (PLCs). These PLCs are commonly used in the WWS Sector and other industries including, but not limited to, energy, food and beverage manufacturing, and healthcare.”3 

Securing critical physical infrastructure and the software it utilizes is a central concern for U.S. national security professionals because these systems underpin every critical service we rely upon for our livelihood and survival. Blockchain technology offers innovative solutions to enhance security, ensure operational integrity, and mitigate risks to these vital assets.  

Immutable Audit Trails for Infrastructure Monitoring  

Blockchain’s decentralized and immutable ledger provides a secure solution for monitoring physical infrastructure. Every operation, system update, and status change can be permanently recorded on the blockchain, allowing stakeholders to audit infrastructure activity in real-time. This transparency ensures that tampering or malicious attempts to compromise critical systems—whether through physical effects or non-kinetic cyber-intrusions—are instantly detectable. Unauthorized changes or anomalies can trigger immediate alerts, empowering operators to react swiftly to mitigate damage and prevent wider-scale disruptions.  

Securing Operational Technology with Decentralized Control  

Operational Technology (OT) systems, such as those controlling power grids, water treatment facilities, and transportation networks, are critical to our national infrastructure. Centralized OT systems are vulnerable single points of failure, where cyber-attacks or insider threats at one entry point could compromise entire networks. Distributing these nodes through a blockchain network significantly reduces the risk of system compromise. This decentralization adds resilience by making it exceedingly difficult for adversaries to launch successful attacks on large-scale infrastructure.  

Strengthening Supply Chain Integrity  

The physical components of critical infrastructure – from transformers in power grids to sensors in water treatment plants – often pass through complex global supply chains before reaching their destination. Blockchain technology paired with Internet of Things (IoT) monitoring provides end-to-end visibility of each component’s journey, ensuring that only verified, authenticated, and untampered-with materials are used in infrastructure systems. By securely recording every transaction and transfer on an immutable ledger, blockchain greatly diminishes the risk of counterfeit or compromised parts being introduced into critical infrastructure, reducing the ability of adversaries to exploit systemic vulnerabilities.  

Implementation of blockchains in service of protecting our critical infrastructure is perhaps one of the most important and efficacious uses cases to date for the technology and we strongly support research, investment, and implementation of them to safeguard U.S. national security.  

The Digital Chamber will continue to collaborate with policymakers, researchers, and industry leaders to advance the integration of blockchain into our nation’s physical infrastructure, protecting the services and resources our citizens depend on. 

About The Digital Chamber

The Digital Chamber is the world’s leading trade association representing blockchain and digital asset businesses. Founded in 2014, the organization has been instrumental in shaping policy, educating lawmakers, and driving regulatory clarity to support the responsible growth of the digital asset industry. For more information, visit www.digitalchamber.org.

The Stablecoin Pivot & U.S. Dollar Dominance in the Digital Era 

It goes without saying that we are at a pivotal moment for the global payments ecosystem. Emerging technologies presenting seamless, real-time, and transparent digital movement of payments across borders, coupled with new and expanding financial architectures that are increasingly being folded into broader strategic geopolitical shifts and realignment policies, amid heightened competition (with both friendly and adversarial countries) that could jeopardize the U.S. dollar’s pre-eminent global position as the world’s reserve currency are all converging, simultaneously. Capturing the opportunities presented by this convergence are immense; so too are the potential economic and monetary headwinds from failing to prioritize and instill U.S. leadership in the digital payments space race. While the U.S. has been slow to get out of the gate on payment stablecoin policy in comparison to other jurisdictions, the recent advancements of both the STABLE Act and GENIUS Act provide Congress with a unique opportunity to bolster U.S. competitiveness and solidify the dollar’s role in the digital era.  

The bipartisan votes to move both the GENIUS Act and STABLE Act through the Senate Banking Committee and the House Financial Services Committee, respectively, represent a seminal moment for payment stablecoin policy in the U.S. For the first time ever, both committees successfully moved payment stablecoin legislation that provides for a robust federal framework responsive to the next evolution of payments. As committee staff continue to work tirelessly to reconcile both pieces of legislation – legislation that The Digital Chamber has been actively engaged in – it is worth noting that the objectives of both legislative texts are not to simply cater to the demands of industry, but rather to redefine, reimagine, and reinforce U.S. competitiveness and the global role of the U.S. dollar in the digital era. As Rep. Bryan Steil (R-WI) aptly put it: “This legislation is a foundational step towards securing the future of financial payments in the United States and solidifying the dollar’s continued dominance as a world reserve currency.” 

A ‘foundational step’ that opens the door to a wide variety of opportunities.  

Take, for instance, the opportunity to move the legislative conversation away from merely speaking about past incidents and hypothetical situations to firmly establishing a federal framework that seeks to address the challenges raised by those past incidents and hypothetical situations. Policymakers and regulators have raised, and continue to raise, concerns about the various risks associated with payment stablecoins, including just how ‘stable’ stablecoins really are. Reports from various jurisdictions and multilateral forums further amplify these concerns – which are justifiably raised, given the demise of past stablecoin issuers and the widespread wealth destruction resulting from the associated fallout. But it is disingenuous to the broader policy debate to raise these concerns without also discussing the regulatory regimes already in place – whether at the State level, in international jurisdictions, or through emerging policy frameworks, such as the STABLE Act or the GENIUS Act. Any serious analysis of the risks and challenges stablecoins may pose must weigh them against these existing and developing standards. Establishing a federal framework that can responsibly address such risks and hypotheticals, while establishing robust protections for users, could put an end to merely talking about one side of the equation. 

Furthermore, we cannot ignore the opportunity to create alternative avenues to purchase U.S. debt. As the U.S. Treasury recently highlighted in its October 2024 report to the Treasury Borrowing Advisory Committee, or TBAC, more than $120 billion worth of collateral backing stablecoins currently in circulation are directly invested in U.S. Treasuries (approximately 2.5% of U.S. Treasury bills (T-bills)). Treasury acknowledged in the report that the structural demand for U.S. Treasuries “may increase as the digital asset market cap grows, both as a hedge against downside price volatility and as an ‘on-chain’ safe-haven asset.” Treasury also stated that the continued growth “in stablecoins, assuming the current trend in stablecoin collateral choices continues (or is forced by a regulator), will create structural demand for short-dated U.S. Treasuries − Recommended issuance should on the margin lean to a higher proportion of T-bills.”  

Both legislative texts would require permitted payment stablecoin issuers to hold reserves that would include U.S. Treasuries. A recent report from Standard Chartered, as described in CoinDesk, found that a federal framework “would further legitimize the stablecoin industry” with the bank also estimating that total stablecoin supply could rise from $230 billion today to $2 trillion by year-end 2028. The bank also estimated that the increase in stablecoin issuance would require the additional buying of $1.6 trillion of Treasury bills over the next four years which “would be enough to absorb all the fresh T-bill issuance planned for the rest of Trump’s second term.” Overall, stablecoin issuers may become the second-largest buyers of T-bills after money-market funds, which currently hold around $2.4 trillion in T-bills. An alternative buyer of T-bills is sorely needed when you consider foreign central bank holdings of U.S. Treasuries continue to decline, as The Digital Chamber recently noted. 

In addition to opening up alternative avenues to purchase U.S. debt, the development of a federal framework and the proliferation of US dollar-pegged payment stablecoins globally also presents alternative avenues to access and utilize U.S. dollars, especially in more marginalized communities or developing economies. In its report, Stablecoins: The Emerging Market Story, Castle Island Ventures not only found that the use cases for stablecoins were broadening beyond their primary use case in facilitating crypto transactions, but also that stablecoin activity was decoupling from broader crypto market cycles proving that stablecoin adoption “has moved beyond merely serving crypto users and trading use cases.” The study also found that of the non-trading use cases, currency conversion (to dollars) is the most frequently reported activity, followed by paying for goods, cross-border payments, and paying or receiving a salary. “Overall, 47 percent of respondents indicated that one of their major goals was saving money in dollars, 43 percent mentioned better currency conversion rates, and 39 percent said earning a yield. The findings are clear: non-crypto uses account for a meaningful share of stablecoin usage modes in the countries surveyed.” 

 These findings were also echoed in a recent blog post sponsored by the Payments Forum of the Federal Reserve Bank of Atlanta. Chris Colson writes: 

“While it’s hard to predict whether or not stablecoins will become a universal payment method, the foundation is forming. Once seen as a hedge against crypto volatility, stablecoins are establishing themselves as a new, innovative payment type. These digital currencies are influencing the future of payments such as purchasing a coffee with a gift card purchased with stablecoins or buying a ticket for a movie at a discount.  

One thing is certain: the future of payments looks a lot more stable.” 

By opening up alternative avenues to purchase U.S. debt and broadening access to U.S. dollar-linked instruments, dollar dominance has taken hold in the payment stablecoin market with approximately 99 percent of the market referencing the U.S. dollar. As U.S. Treasury Secretary Scott Bessent recently remarked, “As President Trump has directed, we are going to keep the U.S. the dominant reserve currency in the world, and we will use stablecoins to do that.” Other countries – both allies and adversaries – are taking notice, however, which again highlights the need for the U.S. to get engaged through enacting a federal payment stablecoin regime.  

Take, for instance, recent discussions in Europe where officials at the European Central Bank (ECB) are searching for answers to address the growing USD-referenced stablecoin market. Ulrich Bindeil, ECB Director General, Market Infrastructure & Payments, raised concerns about the lack of adoption of euro stablecoins during a European Parliament Economic and Monetary Affairs meeting, before recommending a review of the business case and the role of stablecoins for the international role of the euro, including potential adjustments to the EU’s regulatory framework and central bank rules. Similar concerns were raised by Piero Cipollone, Member of the Executive Board of the ECB, where he noted that recent measures taken by the Trump Administration to promote crypto-assets and US dollar-backed stablecoins “raise concerns for Europe’s financial stability and strategic autonomy.” He added: “They could potentially result not just in further losses of fees and data, but also in euro deposits being moved to the United States and in a further strengthening of the role of the dollar in cross-border payments. At the same time, private businesses are increasingly open to accepting stablecoins for customer payments, which could have far-reaching implications for monetary sovereignty.” 

Or, take recent concerns expressed by a Chinese economic think tank about the proliferation of US dollar stablecoins globally. “Once the US dollar stablecoin links the international credit of the US dollar with the application scenarios of the virtual world more closely, it may greatly consolidate the hegemony of the US dollar,” the article states.  

The STABLE Act and GENIUS Act present the opportunity for the U.S. to leap ahead of the competition and solidify the integrity and role of the US dollar in the digital era. The only question is, is the U.S. willing to lead, or cede? 

TDC Responds to CFPB’s Proposed Regulation E Interpretation

TDC Responds to CFPB’s Proposed Regulation E Interpretation on Self-Hosted Wallets and Blockchain Gaming

As part of its Gaming Workstream and partnership with the Blockchain Game Alliance, The Digital Chamber has submitted a formal comment letter to the Consumer Financial Protection Bureau (CFPB) regarding its proposed interpretation of Regulation E as applied to blockchain gaming platforms and self-hosted digital asset wallets. The rule interpretation sought to classify wallets and gaming platforms as financial institutions subject to the Electronic Fund Transfer Act (EFTA) and its corresponding Regulation E compliance requirements. While we commend the CFPB’s commitment to strengthening consumer protection, we explain that applying Regulation E to these technologies is technically infeasible and risks undermining innovation in the blockchain space. 

What You Need to Know:

  1. Self-Hosted Wallets and Developers Fall Outside EFTA and Regulation E
    • Self-hosted wallets are not financial accounts, are not controlled by intermediaries, and their developers do not function as financial intermediaries. These wallets simply provide users with tools to access blockchain networks and fall outside the scope of Reg. E. 
  2. CFPB Should Align with FinCEN’s 2019 Guidance
    • FinCEN has already determined that self-hosted wallet providers are not money services businesses (MSBs) under the Bank Secrecy Act. We urge the CFPB to adopt a consistent approach. 
  3. Blockchain Gaming Platforms Do Not Provide Financial Accounts 
    • Web3 gaming platforms provide profile accounts for gameplay, not for asset custody. Players retain full control of their assets through a “bring your own wallet” model, and transactions occur externally via licensed third-party marketplaces and payment processors—not within the game itself. 
  4. Irreversible Blockchain Transactions Preclude EFTA Compliance 
    • Because blockchain transactions are irreversible by design, game publishers cannot reverse, adjust, or cancel them. Applying EFTA’s consumer protections as written would impose impossible obligations. 
  5. Blockchain Enhances Consumer Protection 
    • However, blockchain gaming platforms and self-hosted wallets reduce the risk of asset loss and unauthorized transactions, while empowering users with full control over their assets—even if a game is discontinued. 
  6. NFTs Are Correctly Excluded from the Definition of “Funds” 
    • We support the CFPB’s conclusion that NFTs are not “funds” under Regulation E, as they function more like collectibles or digital goods rather than mediums of exchange. 

We respectfully urge the CFPB to consider these technical realities and avoid imposing infeasible compliance burdens on blockchain gaming platforms and wallet providers. TDC, the Blockchain Game Alliance, and our respective members stand ready to assist the Bureau in advancing responsible innovation while protecting consumers. 

Read the full comment letter here. 

High-Trust Digital Identity for National Security

March 13, 2025  

By: Jean-Philippe Beaudet 

Digital identity systems are becoming increasingly common worldwide, with over 90% of countries storing identification information digitally. Among these, 67% support in-person digital identity verification or authentication, and nearly 40% issue digital IDs capable of remote authentication for online services and transactions.1 These digital IDs are used to provide services to citizens, track individuals who may pose security risks, and prevent identity theft and fraud. 

Unfortunately, despite the advanced countermeasures designed to prevent counterfeiting and fraud, fake IDs — both physical and digital — continue to circulate widely, particularly on American college campuses. Meanwhile, stolen documentation complicates efforts to secure U.S. borders against illegal migration, not to mention the financial burden on Americans. Identity theft cost Americans over $43 billion in 2022 alone. Blockchain Identity Credentials (BICs) offer enhanced security and data fidelity to protect Personally Identifiable Information (PII) from theft and fraud. According to the University of Texas at Austin’s Center on Identity, BICs could have prevented an estimated $1.59 billion in fraud and identity theft cases between 2000 and 2020.2 

Preventing Identity Fraud with Immutable Records 

Blockchain’s immutable decentralized ledger is a natural solution to the growing challenge of identity fraud. Once an identity is recorded on the blockchain, it cannot be altered or manipulated without detection. Each transaction involving a user’s digital identity – whether authentication for government services, financial institutions, or healthcare systems – can be securely logged, ensuring the integrity of their personal data. This capability drastically reduces the risk of counterfeit documents or the use of stolen credentials, strengthening border security and making it harder for adversaries to exploit weak points in identity verification systems. 

Securing National Identity Databases 

Traditional identity databases are prime targets for hackers, with breaches of government and corporate systems often resulting in massive leaks of sensitive personal information. In August 2024, a breach of National Public Data systems exposed an estimated 2.9 billion records, including names, addresses, and Social Security numbers.3 BICs reduce this risk by spreading control of personal data across multiple points, rather than storing it in one central system. Using cryptographic keys, only authorized entities can access this information, making it far more difficult for hackers to steal data. This approach makes BICs powerful tools for protecting national databases, securing citizens’ identities, and defending against cyber espionage and digital terrorism. 

Empowering Citizens with User-Owned Identities 

One of the most significant advantages of using BICs is the built-in concept of user-owned identity, which gives individuals full control over their personal data. Rather than disclosing entire documents, citizens can selectively share specific pieces of personally identifiable information (PII) as credentials for bespoke purposes—for example, proving they are old enough to buy alcohol without revealing their exact birthdate or home address. This approach enhances privacy while still providing governments and other entities with the verifiable data they need for security checks. By limiting the exposure of sensitive information, self-sovereign identity systems reduce the risk of identity theft and minimize unnecessary data collection. 

Enhancing Border Security and Immigration Control 

Blockchain Identity Credentials can significantly improve the efficiency and security of border control, customs, and immigration processes. By leveraging BICs to authenticate digital IDs in real-time, customs and immigration officials can instantly verify the legitimacy of travel documents and visas, reducing wait times and improving the detection of fraudulent credentials. BICs also enable better tracking of individuals of interest—such as those on watchlists or with criminal histories—while maintaining transparency and accountability. By streamlining identity verification, blockchain enhances immigration control and strengthens national borders against security threats. 

The Digital Chamber will continue to collaborate with policymakers, researchers, and industry leaders to advance the integration of blockchain into identity management systems to foster innovation and protect the identities and safety of U.S. citizens. 

  1. Metz, A., Casher, C., and Clark, J. 2024. ID4D Global Dataset Volume 2: Digital Identification Progress and Gaps. Washington, DC: World Bank. License: Creative Commons Attribution CC BY 3.0 IGO.
  2. How Much Identity Management with Blockchain Would Have Saved Us? A Longitudinal Study of Identity Theft. R. Nokhbeh Zaeem, K. Suzanne Barber, UT CID Report #20-14, July, 2020. Pp 9-11.
  3. Emily DeLetter, Social Security Hack Exposes 2.9 Billion Records in National Public Data Breach. USA Today. August 15, 2024. https://www.usatoday.com/story/tech/2024/08/15/social-security-hack-national-public-data-breach/74807903007/

About The Digital Chamber

The Digital Chamber is the world’s leading trade association representing blockchain and digital asset businesses. Founded in 2014, the organization has been instrumental in shaping policy, educating lawmakers, and driving regulatory clarity to support the responsible growth of the digital asset industry. For more information, visit www.digitalchamber.org.

Blockchain and AI: Securing the Future of National Defense

By: Jean-Philippe Beaudet

March 10, 2025  

Artificial intelligence (AI) has quickly cemented itself into the national security discussion and will remain a key focus area where the U.S. must maintain dominance in ingenuity and development. While U.S. adversaries execute AI-enhanced cyber-attacks and deploy fully autonomous weapons systems, more subtle threats from AI likewise hold drastic implications for American national security. Blockchain-based decentralized AI solutions are the most promising options for our developing national AI ecosystem.  

AI is increasingly integrated into software across all industries, from home thermostats and map apps on every phone to the industrial control systems that monitor tank pressure in nuclear reactors and prevent meltdowns. Alongside this growing reach, the machine learning models that ‘teach’ AI are opaque, vulnerable, and their operation requires enormous amounts of energy and computation. The decentralized, open, and immutable nature of blockchain technology offers solutions to these key challenges.   

Shining Light Into AI’s Black Box   

Decentralized AI (DeAI) – (i.e. models rooted in and built on blockchain networks) provides an alternative to the opaque nature of traditional AI, whose learning processes, disturbingly, the world’s best computing experts cannot fully explain. By basing AI models on blockchains throughout AI model construction, every decision, training step, and data point involved in AI processes can be recorded transparently. This allows stakeholders to audit and verify how AI models learn and make decisions, ensuring we understand the possibilities and vulnerabilities of this technology as both we and our adversaries deploy it in the national security context. After all, if AI is guiding our missiles or identifying the targets, we should endeavor to understand how and why it is reaching its conclusions.  

Data Integrity and Poisoning Defense   

Blockchain’s immutable and transparent ledger ensures that data used in AI models remains tamper-proof and trustworthy. Since each data point is securely recorded and distributed across the network, any attempt to alter or corrupt the data is easily detectable. This feature defends against “model poisoning” attacks, where adversaries insert malicious or biased data to manipulate an AI’s learning process. Blockchain safeguards the integrity of the data-feeding AI models, preventing unauthorized changes and ensuring the reliability and accuracy of AI outputs critical to national security.   

Decentralized Computing and Energy Demands   

AI requires extreme amounts of computing power and energy to function effectively. Relying on centralized data centers to handle the computing and power demand can create cooling, physical security, local grid capacity, cybersecurity, and service delay issues for distributors. DeAI allows networks to pool, distribute, and redirect resources as necessary to meet these increased demands. This is exactly why major cloud computing providers have dispersed their data centers worldwide – but this dispersed, centralized AI infrastructure introduces single points of failure that threaten our national security and economic dynamism. For example, if a major cyber-attack disabled Amazon Web Services (AWS), the leading global cloud service provider, 34% of the globe’s cloud computing would fail, costing U.S. businesses an estimated $11.4 billion per day.1 This type of centralized digital infrastructure is far less resilient than the decentralized alternatives blockchain technologies enable.  

By leveraging blockchain’s immutable and distributed nature the U.S. can mitigate AI’s black-box risks, defend against adversarial manipulation, and create a more robust computational backbone for our nation’s AI-driven security applications. A decentralized approach ensures that America’s AI ecosystem remains resilient, verifiable, and resistant to the single points of failure that threaten centralized architectures. In an era where technological superiority dictates geopolitical power, embracing blockchain-based AI is not just an option—it is a necessity. 

If you have any questions, please reach out to Policy@digitalchamber.org

Who We Are 

The Digital Chamber (TDC) advocates for national and international standards that leverage blockchain’s inherent strengths to mitigate AI’s greatest risks and unleash AI’s economic dynamism. 

Citations 

1. Parametrix Insurance, “Cloud Outage and the Fortune 500”, 2023.