#20 in the LEI Lightbulb Blog Series – How the LEI and vLEI Can Advance Global Digital Asset Oversight

As the digital asset and traditional financial ecosystems converge, regulators around the world are working to address issues such as market structure, transparency, and accountability. This highlights the need for a universal, interoperable organizational identity layer for digital finance, with developments such as MICA in the EU and the GENIUS and CLARITY Acts in the U.S. demonstrating the potential for the LEI and vLEI to meet this requirement.

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As mainstream adoption of digital assets accelerates, the need to counter illicit activity and protect global financial stability demands a unified approach. A central concern for regulators is identifying who exactly is participating in digital asset markets and transactions, with the International Monetary Fund highlighting that “regulators find it tricky to keep tabs on thousands of actors who may not be subject to typical disclosure or reporting requirements.”

This challenge stems from how digital assets were originally conceived. Because digital assets are inherently borderless and decentralized, their traditional financial infrastructure has long resisted a globally consistent and coherent regulatory approach.

An underlying problem is that most existing identification systems are jurisdiction-specific or vendor-specific and mutually incompatible, complicating and hindering regulatory compliance and enforcement. Whereas the migration to decentralized finance is both borderless and 24/7. Consequently, regulators globally are increasingly recognizing the need for a universal, interoperable identity layer that anchors compliance and KYC obligations across diverse platforms, blockchains, and actors. Traditional assets are becoming tokenized, and onchain reporting capabilities will need to be adjusted to meet new regulatory requirements.

The LEI and vLEI for digital assets

This need is driving increased regulatory interest in the role the well-established Global LEI System (GLEIS) can play as the only open, standardized, and regulator-endorsed organizational identity management infrastructure. Through the Legal Entity Identifier (LEI) and its cryptographically verifiable counterpart, the verifiable LEI (vLEI), any legal entity operating within the digital asset ecosystem can be uniquely and unambiguously identified, including virtual asset service providers (VASPs), stablecoin and digital asset issuers, and custody providers. For regulators, this promotes interoperability, reduces fragmentation, and strengthens supervisory oversight – while lowering compliance costs for market participants.

GLEIF is also working with its technical partners to extend the LEI standard onchain through the vLEI. By enabling verifiable identity data to be embedded directly into onchain assets and smart contracts, further regulatory and operational benefits across jurisdictions can be realized. For instance, a stablecoin issuer could prove its legal identity at the contract level – distinguishing legitimate, reserve-backed stablecoins from fraudulent imitations.

Importantly, for policymakers grappling with regulating a moving target amid ongoing innovation and fragmentation across the digital asset ecosystem, the vLEI provides a future-proof identity layer aligned with evolving digital identity, AI verification, and onchain compliance architectures. Because the vLEI is designed to be ledger-agnostic and support cross-chain interoperability, the same organizational identity can be reused consistently across multiple blockchains and compliance frameworks.

Spotlight on the U.S.: Regulating digital asset markets

The capabilities and benefits of the LEI and vLEI align closely with U.S. digital asset policy ambitions to develop a clear, unified regulatory framework that mitigates systemic risk and bolsters market transparency and integrity.

A report published in July 2025 by the President’s Working Group on Digital Asset Markets provided a roadmap of recommendations for lawmakers and regulators; the same month, Congress achieved a major milestone with the enactment of the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act) , which provides a comprehensive regulatory framework for “payment stablecoins” and Pemitted Payment Stablecoin Issuer (PPSIs). Rulemaking is needed at several financial agencies to implement the statute. While proposals have already been issued by the Treasury Department and the Federal Deposit Insurance Corporation, additional rulemakings are scheduled across identified regulators throughout 2026. The FDIC has since extended the comment deadline for its notice of proposed rulemaking from Feb. 17 to May 17, which is not expected to change the broader implementation timeline. Ultimately, the GENIUS Act will subject non-bank entities to requirements similar to those already imposed on traditional regulated entities regarding financial stability, transparency, and anti-money laundering (AML) / counter-terrorist financing (CTF) obligations.

In parallel, a market infrastructure bill for digital assets – the Digital Asset Market Clarity Act (CLARITY Act) – outlines requirements for digital assets more broadly. As the regulatory framework becomes clearer, there is clear scope for the LEI and vLEI to provide cross-border interoperability, transparency, and standardization that directly support overarching policy objectives, enabling U.S. regulators to better monitor and analyze data and identify related entities.

There is also a compelling opportunity for broader alignment. Most notably, under joint rules on data standards and reporting formats as required by the Financial Data Transparency Act (FDTA). Proposed rules to implement the statute were released in 2024 and proposed using the LEI as a common identifier for entities. The rules are anticipated to be finalized in spring 2026, and it is GLEIF’s position that if the final rules require regulated entities to report to U.S. regulators using an LEI under the FDTA, regulating non-bank entities such as stablecoin issuers and custody providers in a similar fashion as part of the GENIUS and CLARITY Acts marks a logical extension. This would help to promote unprecedented efficiency, transparency, and accessibility across the U.S. financial ecosystem.

A global regulatory consensus for digital assets beckons

Regulatory developments in the U.S. signal a global trend. Though there remains some divergence in philosophies and approaches across jurisdictions, the general direction of travel towards more regulatory clarity and certainty for digital assets has now been firmly established.

Notably, the LEI and, by extension, the vLEI are already playing an important role within this international framework. At the supra-national level, the Financial Action Task Force (FATF) has published its updated Recommendation 16 to enhance payment transparency, which explicitly references the LEI as a key identifier for legal persons in domestic and cross-border payments and value transfers.

In the European Union (EU), the recast Transfer of Funds Regulation (TFR) requires EU entities to disclose their LEI for digital transfers. The EU’s Markets in Crypto-Assets (MiCA) goes further, requiring issuers to provide an LEI when making disclosures and requiring crypto-asset service providers (CASPs) to obtain an LEI before being licensed. Elsewhere, ongoing consultations by the Australian Securities and Investments Commission (ASIC) and the UK's Financial Conduct Authority (FCA) present opportunities to expand the use of the LEI across emerging regulatory frameworks.

In the UK, the FCA’s consultation also points to the LEI as a relevant tool for organizational identification in digital asset markets. This matters because consistent identifiers make disclosures easier to compare and supervise across firms, products, and jurisdictions.

Championing the LEI and vLEI

As the digital asset market starts to be regulated in a similar manner to traditional finance, it is increasingly apparent that, beyond its foundational use in traditional finance, the LEI and, particularly, the vLEI can now play a pivotal role in bridging the trust gap.

To realize this potential, regulators, industry stakeholders, and service providers should champion the adoption and integration of LEI and vLEI within their operations and frameworks. Regulatory developments in the U.S. under the GENIUS and CLARITY Acts create an immediate opportunity to move toward a standardized, globally interoperable identity layer, promoting a safe and scalable digital asset market.

The ‘LEI Lightbulb Blog Series’ from GLEIF aims to highlight the breadth of acceptance and advocacy for the LEI across the public and private sectors, geographies, and use cases by identifying which industry leaders, authorities, and organizations support the LEI and for what purposes.

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