TLDR
- a16z recommends privacy-preserving digital ID to strengthen AML compliance.
- Zero-knowledge proof and multi-party computation can secure user data.
- The distinction between decentralized and stable payment coins is crucial.
- Public-private collaboration could streamline innovative compliance solutions.
Andreessen Horowitz (a16z) submitted first round feedback to the US Treasury Department on Implementation of the GENIUS Act. The venture firm advocated for privacy-preserving decentralized digital identity to strengthen compliance and security.
It recommended FinCEN modernize AML/KYC regulations using zero-knowledge proof and cryptographic solutions. The submission also emphasized clear regulatory differences between decentralized and stable payment coins to support innovation.
a16z operates Privacy-First Crypto Compliance
a16z marked that decentralized digital identity can increase security while protecting civil liberties. It urged regulators to adopt zero-knowledge proof and multi-party computation for privacy-safe identity verification.
These technologies allow verification without revealing sensitive personal data. The company also recommended reusable digital credentials to streamline compliance and reduce fraud between financial institutions.
The feedback emphasized updating AML/KYC frameworks to support emerging technologies. Outdated regulations currently hinder innovation and prevent the adoption of privacy-preserving solutions.
a16z proposed using FinCEN’s exceptional assistance authority to test modern compliance technologies. Public-private collaborations and technology sprints could accelerate practical implementation and approval processes.
The submission also distinguished between centralized and decentralized identity systems. Decentralized solutions give individuals control over their data. They reduce cyber risks and reduce the risk of surveillance abuse.
According to the report, these approaches are consistent with national security goals while promoting financial innovation.
Finally, a16z recommended that new rules balance law enforcement needs with privacy. Reusable digital credentials can improve the detection of illicit financing. Cost reductions for institutions could follow through streamlined verification processes.
The company emphasized that these changes can lead to responsible, privacy-focused adoption.
Stablecoins, competition and innovation under GENIUS
a16z called on the Treasury Department to clarify the definitions in the GENIUS Act, which distinguish decentralized stablecoins from stable payment coins. Decentralized stablecoins, backed by assets like ETH and SOL, operate autonomously via smart contracts.
Stablecoins remain fiat-backed and centralized, with traditional reserve structures. Clear distinctions are essential for consistent and fair regulation.
The feedback also called for promoting competition between stablecoin issuers. Rules should avoid favoring centralized actors over decentralized alternatives. Legislative clarity could encourage innovation while maintaining consumer protection.
a16z emphasized technology-driven AML solutions to complement regulatory objectives.
Tax and accounting treatments also require updates to reflect real world crypto use. Improper rules can hinder adoption or create confusion. a16z called on the Ministry of Finance to ensure that policies support practical deployment of decentralized financial tools.
The company sees these steps as crucial for the US to maintain leadership in the digital economy.
Public filings, including the a16z filing, note the importance of collaboration between regulators, innovators and the crypto ecosystem. The implementation of GENIUS represents a defining moment in shaping US digital currency policy.
Clear, innovation-friendly rules could strengthen the dollar while promoting privacy-oriented solutions. Analysts note that these measures could set a precedent for global regulations frames.
