The US government has demonstrated respect for privacy and prefers stable over central bank-issued digital assets. President Donald Trump has restricted the development of CBDCs, citing privacy concerns. However, the Ministry of Finance and the International Bank for Reconciliation are already exploring ways to turn stubcoin into a convenient surveillance tool.
summary
- The US opposed the creation of CBDCs due to potential privacy violations, but the Treasury Department is investigating the possibility of analyzing blockchain currency data.
- The economist at International Village Bank proposed the use of AML compliance scores. Critics compare them to China’s social credit system.
- A16Z analysts suggest that there is no illegal activity in the chain without compromising privacy.
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The US Treasury is trying to monitor Stablecoin transactions
The Treasury is exploring opportunities to access transactional data from Stablecoins. In a request for public comment released on August 18, the Ministry of Finance will invite “people interested members” to discuss methods (methods and techniques) that could “detect and mitigate illegal financial risks, including digital assets.” The request has been signed by Executive Director Rachel Miller. The Ministry of Finance will accept comments from the public until October 17th, 2025.
According to Miller, the reason for the government to have access to financial information is to meet the requirements set by the Genius Act. The Genius Law was signed into law by President Donald Trump on July 18, 2025. The law sets up a legal framework for ridiculous issuers and protects consumers from potential fraud.
As the Genius Act treats Stablecoin issuers as financial institutions, all federal laws applicable to such institutions are currently associated with Stablecoins.
Miller highlighted several directions for potential data monitoring (mainly, this data is associated with AML features, sanctions compliance, and identity checks). These include application programming interfaces, AI-based solutions, identity verification, and more.
This document specifically calls for recommendations on overcoming regulatory, operational, and legislative obstacles to using identity verification to detect illegal activities. It also asks for recommendations regarding the integration of blockchain data with off-chain information and asks what the main challenges are for using blockchain analysis. Miller mentions privacy protection, but these details reveal the US Treasury’s interest in educating transaction data.
Privacy vs security
According to Timothy Massad, former chairman of the Commodity Futures Trading Commission, the Treasury will fight illegal activities by implementing zero-knowledge digital credentials for Defi users. These credentials blur the data from everyone, but the information will be made available through the request of the authorities. According to Massad, without these credentials, the smart contract would not process the transaction.
In a work dedicated to the myths of blockchain privacy, David Sverdlov and Aiden Slavin of A16Z suggested that the fight against illegal on-chain activities takes place at the expense of a violation of privacy. They list possible privacy concessions. Consumers will need to provide voluntary and involuntary selective anonymization of transaction data to prove the legitimacy of the transaction or stored funds. Other methods include withdrawal and deposit screening.
read more: What is Zero Knowledge Proof? And how do you protect your data?
Examples of Stablecoin transaction data from a BIS economist
On August 13, 2025, the Economist at International Village Bank released a piece titled “An Approach to Anti-Money Laundering Compliance.”
In the work, the author states that existing reliance on trustworthy intermediaries for money laundering does not work well in decentralized public blockchains. They believe blockchain data needs to be closely analyzed to combat money laundering.
This article includes suggestions to create an AML compliance score based on the potential involvement in token misconduct. Scores can be used to block or limit transactions for inter-cipher conversions through banks. Rage journalist Lola Leetz claims that the implementation of digital IDs for blockchain-based services will turn into authorized networks.
ZeroHedge Media compares its AML compliance score with China’s social credit points. It claims:
“No one should surprise anyone (this) (unless you really believe that there is no CBDC in the US). We have long said that on-ramp and off-ramp are significantly regulated and KYC-ED is expected as the global economy becomes a bigger component of the global financial system.”
CryptoAssets’ AML “Compliance Score” BIS proposal dresses up old ideas from New Tech. This is the same subjective, risk-based approach that has failed in traditional finance, and is now applied to blockchain data.
result? A system that could destroy furniture, splitting…– Meraviola (@martinag2702) August 13, 2025
Digital IDs contradict previous actions of the Trump administration
President Donald Trump banned the development, issuance and distribution of digital dollars through an executive order on January 23, 2025. Therefore, the global reserve currency was prevented from becoming digital. The USD stubcoins are fixed at the price of US dollars, while the digital dollars were actually tokenized dollars.
The CBDC ban was explained primarily by government concerns about individual privacy. This could have been breached if the US allowed the creation of digital dollars.
We chatted about the implications of the GENIUS Act with Crypto Dad @giancarloMKTS who has called out the loss of privacy in stablecoins:
Why block a US CBDC while also passing the GENIUS Act to impose similar surveillance among private stablecoin issuers? 🇺🇸⏬ pic.twitter.com/LOgF5uuAO1
— Coinage (@coinage_media) August 24, 2025
Because Stablecoins are not directly affiliated with the government, USD Stablecoins are presented as private alternatives to CBDC. However, the US government doesn’t seem to care that it has tools for financial surveillance.
You might like it too: Stablecoins are inevitable, but you cannot expand without a truly private digital dollar | Opinion
