November 29, 2021

Volume XI, Number 333

Advertisement
Advertisement

President’s Working Group on Financial Markets Releases Report on Stablecoins

On November 1, the President’s Working Group on Financial Markets (PWG), the FDIC, and the OCC announced the release of a report on stablecoins — virtual currencies that, unlike Bitcoin, are backed by assets like gold or fiat currency. Stablecoins aim to eliminate the hesitation many consumers have about mainstream cryptocurrencies, namely their unpredictable volatility.

While the report recognizes the benefits of stablecoins, it cautions about a range of concerns related to the potential for destabilizing runs, disruptions in the payment system, and concentration of economic power. The report urges Congress to act promptly to enact proper legislation that ensures stablecoins are subject to a clear regulatory framework on a consistent and comprehensive basis. To that end, the report makes several legislative recommendations, including (i) requiring a regulatory framework for stablecoins that is backed by the FDIC; (ii) subjecting stablecoin wallet providers to proper federal oversight and appropriate risk-management standards; and (iii) requiring compliance with activity restrictions that limit affiliation with commercial entities and limits on use of users’ transaction data.

Also on November 1, Treasury provided a fact sheet on the PWG report identifying the purpose of the PWG report, and the risks and recommendations provided in the report.  CFPB Director Rohit Chopra issued a statement on the same day noting that while not a member of the PWG, the CFPB “will be taking several steps related to this market,” including its recent order to six large technology companies regarding their payments-related plans and practices (previously discussed in a Consumer Finance and Fintech blog post here).  In a similar statement by Acting Comptroller of the Currency Michael J. Hsu, he noted his support for the report’s recommendation that “[s]tablecoins need federal prudential supervision to grow and evolve safely.”

Putting it into Practice: This report should be viewed in light of the recent regulatory push by other agencies to regulate the use and transmission of virtual currencies (we previously discussed this recent trend in earlier Consumer Finance & FinTech Blog posts herehere, and here). Stablecoins, like other virtual currencies, are a hot topic among U.S. regulators where companies are dealing with unclear regulatory guidelines and confusion related to which agency regulates what aspect of cryptocurrencies.  Stablecoin issuers and owners should be aware of the rapidly developing field and that stablecoins may be subject to regulation by multiple federal agencies.

Co-authored by Gabriel Khoury, a law clerk in Sheppard Mullin’s Washington, D.C. office.

Copyright © 2021, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume XI, Number 309
Advertisement
Advertisement
Advertisement
Advertisement
Advertisement
Advertisement

About this Author

Moorari Shah Bankruptcy Lawyer Sheppard Mullin Law Firm
Partner

Moorari Shah is a partner in the Finance and Bankruptcy Practice Group in the firm's Los Angeles and San Francisco offices. 

Areas of Practice

Moorari combines deep in-house and law firm experience to deliver practical, business-minded legal advice. He represents banks, fintechs, mortgage companies, auto lenders, and other nonbank institutions in transactional, licensing, regulatory compliance, and government enforcement matters covering mergers and acquisitions, consumer and commercial lending, equipment finance and leasing, and supervisory examinations,...

213-617-4171
A.J. S. Dhaliwal Bankruptcy Attorney Sheppard Mullin Washington DC
Associate

A.J. is an associate in the Finance and Bankruptcy Practice Group in the firm's Washington, D.C. office. 

A.J. has over a decade of experience helping banks, non-bank financial institutions, and other companies providing financial products and services in a wide range of matters including government enforcement actions, civil litigation, regulatory examinations, and internal investigations.

With a diversified regulatory, compliance, and enforcement background, A.J. counsels financial institutions in matters involving...

202-747-2323
Advertisement
Advertisement
Advertisement