June 29, 2022

Volume XII, Number 180

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June 29, 2022

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Stablecoin Regulation Update

On May 10, Treasury Secretary Janet Yellen presented the Financial Stability Oversight Council (FSOC) Annual Report before the Senate Banking Committee about the need for sensible stablecoin legislation (we have previously discussed the President’s Working Group (PWG) report on stablecoins here and here).  Secretary Yellen cites the findings in the PWG report as reason to conclude that “the current statutory and regulatory frameworks don’t provide consistent and comprehensive standards for the risks of stablecoins as a new type of payment products, and urges Congress to enact legislation to ensure that stablecoins and such arrangements have a federal prudential framework.”

Coincidentally, on the day before Secretary Yellen’s testimony, a popular algorithmic stablecoin pegged to the U.S. dollar lost almost all of its value. The rapid decline of a stablecoin that was supposed to reflect the value of the U.S. dollar and that proponents hoped one day would replace the fiat currency prompted the Treasury Secretary to emphasize that there are unaddressed financial risks with stablecoins and that a framework of regulation is appropriate.

Putting It Into Practice: On May 12, SEC Commissioner Hester Peirce recited a now-familiar refrain in the wake of the stablecoin crash as a reason to believe that regulation is right around the corner. Commissioner Peirce added that such potential regulation should make room for a “trial-and-error” regulatory framework, but to date, there is no indication that such regulation is actually imminent.

Copyright © 2022, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume XII, Number 140
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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
Associate

Gabriel is an Associate on the Telecom team and the Co-Lead Associate on the Blockchain and Digital Assets team in the firm’s Washington, D.C. office. He is a Blockchain Law Professional as Certified by the Blockchain Council.

At Sheppard Mullin, Gabriel assists the Telecom team in all aspects of communications law and regulation including, satellites, spectrum, 5G implementation, media companies, and new technologies. He assists the Blockchain and Digital Assets team in legal issues relating to the use of blockchain technology, social media, internet, video games, online gambling,...

202-747-2194
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