House Financial Services Committee Focuses on PWG Stablecoin Report – Finance & Banking

United States: House Financial Services Committee Focuses on PWG Stablecoin Report

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On February 8, the House Financial Services Committee held a hearing entitled “Digital Assets and the Future of Finance: The President’s Task Force on Financial Markets” to consider the legislative recommendations of the panel’s report. President’s (PWG) work on stablecoins (we already discussed the report of this in a previous Consumer Finance & FinTech blog post here).

Nellie Liang, Undersecretary for Internal Finance at the Treasury Department, presented the report’s findings and highlighted the need for lawmakers to introduce a legal framework for stablecoins and other new types of digital assets. “Current statutory and regulatory frameworks do not provide consistent and comprehensive standards for the risks of stablecoins as a new type of payment product.”

Liang stressed that the legal framework must address the prudential risks of stablecoins: (i) the risk of leakage of stablecoins; (ii) payment system risks; and (iii) risks due to the concentration of economic power. Liang said there was still a lot of work to be done despite the recent crypto sprint by banking agencies and the SEC and CFTC’s assessment of digital exchange authorities.

Committee members expressed concern that limiting the issuance of stablecoins to banks could negatively impact competition in the industry and racial equity among its potential customers. Committee chair Maxine Waters asked if tech companies should be allowed to issue stablecoins. Quoting the Liangs to the “historic separation of banking and commerce”, Liang said that “[i]In this case, we believe that stablecoins, as a payment instrument, should not be issued by a technology company.”

put into practice: This audience should be considered in light of the recent push to regulate the use and transmission of virtual currencies (we have already discussed this recent trend in previous Consumer Finance & FinTech blog posts here, here and here) . Stablecoins, like other virtual currencies, are a hot topic among US regulators where companies are faced with unclear regulatory guidelines and confusion regarding which agency regulates which aspect of cryptocurrencies. The regulatory frameworks that apply to stablecoin issuers and service providers are seen by many as inconsistent, creating opportunities for regulatory arbitrage and uncertainty among stablecoin users.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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