Although the policy outlook remains uncertain, more policymakers are encouraging bank-like regulation for stablecoin issuers. Following on the November 2021 stablecoin report (the “Stablecoin Report”) issued by the President’s Working Group on Financial Markets, the Federal Deposit Insurance Corporation (“FDIC”) and the Office of the Comptroller of the Currency, which recommended new stablecoin legislation, Congressional Democrats, led by House Financial Services Committee member Rep. Josh Gottheimer (D-NJ), are working on a bill that would create bank-like regulation for stablecoin issuers.
The draft bill, which has been the subject of reporting but which has not officially been released, would allow stablecoins to be issued only by insured depository institutions or “qualified” nonbank stablecoin issuers that meet certain conditions. In this respect, the bill differs from the recommendation in the Stablecoin Report, which proposed that only insured depository institutions be allowed to issue stablecoins and engage in related activities.
The draft bill would create a new FDIC insurance fund for nonbank stablecoin issuers that would parallel deposit insurance for banks. Under the draft bill, a number of specific requirements would apply to a nonbank stablecoin issuer, including a requirement to hold collateral in U.S. dollars or in federal government securities (or other assets to be determined), in each case equaling 100% or more of the value of the stablecoins the nonbank has issued. Nonbank stablecoin issuers also would be subject to regulations to be drafted by the Treasury Department, including standards regarding a leverage ratio, auditing requirements, redemption requirements and liability management standards.
In a similar show of support for bank-like regulation of stablecoins, Jelena McWilliams said in remarks just before leaving the FDIC as chairman that the FDIC is exploring whether stablecoins are deposits and whether they could qualify for deposit insurance. She noted that her “personal view is that generally bank-issued stablecoins closely resemble digital representations of deposits,” and said that next steps for the FDIC could include amendments to the deposit insurance rules. She also suggested that stablecoin regulation should generally be tailored according to the issuer (e.g., large diversified banks vs. small institutions dedicated to stablecoins). The new FDIC Acting Chairman Martin Gruenberg reiterated the FDIC’s broader focus on digital assets today, including it in the 2022 FDIC priorities, and noting that digital assets “could pose significant safety and soundness and financial system risks.” He said that federal banking agencies must analyze these potential risks and, “[t]o the extent such activities can be conducted in a safe and sound manner,” provide guidance to the banking industry to manage the potential prudential and consumer protection risks.
For additional background, see:
- What the Stablecoin Industry Can Expect From Congress In 2022, January 25, 2022
- President’s Working Group on Financial Markets and Federal Banking Regulators Issue Report on Stablecoins, November 8, 2021
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