Treasury Is Pushing to Impose Bank-Like Rules on Stablecoins
(Bloomberg) -- A U.S. effort to regulate stablecoins favors policing them like lenders, which could jeopardize the future of tokens from firms that refuse to seek federal banking licenses.
Led by the Treasury Department, the President’s Working Group on Financial Markets is aiming to issue a report on stablecoins by the end of the month. An expected recommendation is that Congress establish a limited charter allowing new crypto banks to manage stablecoins as deposits, according to a senior official involved with the report who asked not to be identified because it hasn’t been finalized.
The group of regulators has also been considering urging the Financial Stability Oversight Council to examine whether stablecoins pose a systemic threat. That option would be another approach to impose bank-like rules on the tokens, particularly if lawmakers fail to act.
The Wall Street Journal previously reported that Treasury is considering ways to regulate stablecoins like banks.
Anxiety in Washington has been ratcheting up over stablecoins, which are pegged to the U.S. dollar and other fiat currencies to avoid the wild price swings of cryptocurrencies such as Bitcoin. Federal officials are worried that an investor run could trigger a financial panic, and that crypto firms are using stablecoins to offer banking services without consumer protections.
Relying on Congress or FSOC would probably be a slow process for bringing oversight to stablecoins, which already have a market value exceeding $120 billion. Treasury officials have also been considering shorter-term alternatives to address the unregulated tokens in the interim, people familiar with the work have said, but details of those options aren’t clear.
“Circle has already been working toward becoming a full-reserve national commercial bank,” Dante Disparte, chief strategy officer and head of global policy for Circle Internet Financial Inc., said in a statement Friday. His is one of the companies behind a leading stablecoin, USDC. Disparte called reports about the Treasury’s intent “encouraging,” and said Circle intends to continue working with regulators on appropriate crypto policies.
Imposing banking rules on stablecoins could run counter to Securities and Exchange Commission Chair Gary Gensler’s recent campaign to declare many cryptocurrencies securities that should follow SEC rules.
A few crypto firms have already sought and won conditional bank charters from the Office of the Comptroller of the Currency, but it’s uncertain whether those licenses will allow them to issue stablecoins in a way that satisfies regulators. The OCC has more recently slammed the brakes on granting such charters, and Acting Comptroller Michael Hsu has publicly warned that cryptocurrencies could threaten the financial system.
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