Andreessen Horowitz (a16z) has urged the U.S. Treasury Department to enable private, decentralized digital identities as part of the GENIUS Stablecoin Act .The firm’s proposal emphasizes using privacy-preserving technologies to modernize regulation and protect civil liberties. According to Michelle Korver, head of regulatory affairs at a16z’s crypto division, decentralized digital identity systems can help the U.S. lead in both security and innovation. In its submission, a16z called for the Financial Crimes Enforcement Network (FinCEN) to update anti-money laundering (AML) and know-your-customer (KYC) frameworks. The firm recommends adopting zero-knowledge proofs (ZKPs) and multi-party computation (MPC) — cryptographic tools that allow identity verification without revealing unnecessary personal information. The proposal urges FinCEN to grant exemptions for institutions adopting digital ID solutions, helping innovation thrive under responsible oversight. a16z also highlighted the benefits of decentralized systems over centralized ones, explaining that they empower users to control their data, reduce cyber risks, and prevent surveillance abuse. Reusable digital credentials, the firm added, could simplify compliance, cut fraud, and lower institutional costs. Building Rules for a Stronger Stablecoin Future In its response to the Treasury’s Advance Notice of Proposed Rulemaking, a16z supported creating innovation-friendly stablecoin rules that protect consumers while strengthening the dollar. The company proposed the following recommendations: Differentiate between decentralized and payment stablecoins Encourage competition and fairness across the market Modernize AML regulations using cryptographic tools Update tax rules to match how digital assets are used “As GENIUS unfolds, the United States has a unique opportunity to lead in responsible, privacy-focused innovation,” Korver concluded. The GENIUS Act, signed by President Donald Trump in July 2025, establishes a federal framework for regulating stablecoins. It requires full reserve backing and regular audits for issuers. However, Senator Elizabeth Warren has criticized the act, calling it overly lenient on “crypto banks” and warning of potential risks to financial stability. Meanwhile, Coinbase also submitted recommendations urging the Treasury to narrow the GENIUS Act’s scope to avoid burdening open protocols and early-stage innovators.
