Circle, Paxos Test Blockchain Verification Tool to Combat Fake Stablecoins

At the heart of this initiative is Bluprynt, a blockchain startup co-founded by law professor Chris Brummer, according to a report by Bloomberg. The verification system, modestly dubbed “Know Your Issuer” (KYI), leverages cryptographic credentials to confirm a token’s origin at the moment of issuance, enabling market participants to trace the stablecoin directly back to its authentic issuer. Bluprynt describes the solution as delivering “provenance upfront,” intending to streamline security, reduce complexity, and reassure both regulators and institutional users. Professor Chris Brummer highlighted that counterfeit tokens pose widespread risks, undermining confidence across digital asset ecosystems and eroding trust among participants.

This collaborative pilot was conducted with two of the largest U.S. dollar-pegged stablecoins: USDC (issued by Circle) and PYUSD (issued by Paxos for PayPal), making them prime candidates for such a verification mechanism.

The technological step arrives on the heels of shifting regulatory dynamics in the United States. Both Paxos and Circle as well as Ripple have recently submitted applications for national trust charters through the U.S. Office of the Comptroller of the Currency (OCC). These applications signal an accelerated push to shift from fragmented state-level supervision to uniform federal oversight, especially in an era shaped by the GENIUS Act, a law passed in mid-2025 that clarifies stablecoin issuer responsibilities.

For Paxos, this move marks a renewed attempt after its prior conditional approval, initially granted in 2021 and allowed to lapse in 2023, to secure a national trust charter. Paxos continues to uphold its reputation for regulatory adherence and transparency, especially concerning its suite of stablecoins like PYUSD and USDP, along with tokenization services.

The necessity for KYI is underscored by a broader trend: stablecoins have become the backbone of much crypto-based wrongdoing. Chainalysis data reveals that in 2023, stablecoins accounted for a big portion of scam flows, and an even larger share of illicit payments, contributing to billions in illicit activity over 2022–2023.

Users and institutions increasingly demand assurance that the stablecoins they hold are legitimate, backed, and compliant with regulations. Paxos, for instance, has consistently highlighted its regulatory track record, including monthly public reserve attestations, full backing of tokens one-to-one with U.S. dollars, and oversight by the New York Department of Financial Services.

While KYI provides a technical confirmation of who issued a token, it does not directly attest to the stablecoin’s backing or compliance with financial regulations. Verifying issuer identity is one facet of trust. Yet, users still must evaluate whether a stablecoin is supported by reliable reserves, governed under credible oversight, and subject to audit.

For wallet providers and infrastructure platforms, KYI introduces an additional layer of on-chain verification that can be integrated into user interfaces or trading systems, helping reduce the risk of interacting with counterfeit tokens. For institutional and regulatory stakeholders, it establishes a clear record of a token’s origin, supporting transparency efforts though not replacing reserve attestations or other compliance tools. For end-users, especially retail participants, its value will depend on whether wallets and exchanges choose to implement KYI, potentially giving them clearer visibility into which stablecoins are authentic.

Although it is still early days, the KYI pilot suggests a path toward a more accountable stablecoin ecosystem. If embraced widely, it could lower the risks posed by counterfeit tokens and bolster the credibility of issuer-backed cryptocurrencies. Simultaneously, the push by Circle, Paxos, and Ripple for federal charters reflects how the stablecoin industry is evolving, from innovation on the fringes toward formal integration with traditional financial infrastructure.