Crypto Compliance After GENIUS and CLARITY: Why FinTechs and PayFacs Must Now Rethink Risk and Compliance
- FinScan
- Aug 4
- 3 min read
With the passage of the GENIUS Act and the CLARITY Act, the US has officially brought stablecoins and digital assets under the scope of traditional financial regulation. These laws mark a decisive shift for FinTechs, PayFacs, neobanks, and payment processors: what was once optional or unclear is now regulated. But while policymakers have set new rules in motion, most institutions aren’t ready to meet them.
The compliance infrastructure simply hasn’t kept pace with the digital asset ecosystem. And while regulators enjoy the benefit of retroactive enforcement and slow-moving rulemaking, financial institutions are facing immediate risks, from consent orders to financial penalties and reputational fallout.
From gray area to red tape: what the laws actually do
The GENIUS Act establishes a federal licensing framework for stablecoin issuers, requiring 1:1 cash or Treasury reserves, monthly attestations, and compliance with Bank Secrecy Act (BSA) obligations. It also gives regulators the authority to restrict platforms from supporting unlicensed or foreign-issued coins after 2028.
CLARITY Act goes further by expanding the definition of digital asset service providers and making them subject to AML rules. Critically, it gives regulators authority to look back at historical digital asset activity, opening the door for enforcement actions based on past conduct—even before these laws took effect.
Together, GENIUS and CLARITY attempt to fit digital assets into a traditional regulatory box. But in doing so, they expose a serious mismatch between what the laws require and what’s technically or operationally feasible.
The disconnect: regulation vs. reality
Many of the new compliance expectations assume visibility and control that don’t always align with the way digital asset systems work. Non-custodial wallets give users full control of their private keys and digital assets—meaning only the user can access or move funds, with no intermediary involved. In contrast, P2P payment providers are custodial; they manage users’ accounts and funds on centralized infrastructure, hold private keys (if crypto is involved), and are subject to traditional financial regulations, including KYC and AML requirements. This creates a risk trifecta: (1) challenges meeting compliance obligations, (2) regulatory uncertainty around how enforcement will unfold, and (3) operational design challenges that pit decentralization against control.
Rethinking risk in a digitally native ecosystem
Financial institutions can’t afford to wait for perfect regulatory clarity. To avoid becoming enforcement examples, they need to start modernizing their compliance approach now.
That starts with recognizing that wallets and on-chain activity are not separate from identity and KYC—they are part of it. A user’s transaction history, wallet behavior, and digital footprint should be considered extensions of their risk profile, not anomalies to be treated in isolation.
This shift requires a digital-first risk mindset. The warning signs of illicit activity are no longer limited to flagged transactions or document mismatches. Behavioral indicators like frequent IP address changes, the use of VPNs or anonymizers, logins from sanctioned jurisdictions, or suspicious patterns in wallet creation and abandonment are more relevant than ever.
In this new model, KYC isn’t a one-and-done onboarding process. It becomes an always-on, dynamic framework that links identity, behavior, and risk across both traditional and blockchain rails. Only by correlating these signals in real time can institutions detect and respond to emerging threats before regulators do.
The stakes are rising
The GENIUS and CLARITY Acts represent a long-overdue step toward digital asset regulation. However, they also highlight how far behind most institutions are. As regulatory enforcement ramps up, those that treat compliance as a catch-up task rather than a core capability will find themselves increasingly exposed.
The firms that succeed in this environment will be those that act now to interpret the new rules, and to rebuild their compliance infrastructure to reflect the way financial crime and financial systems actually work today.
