Washington, D.C., March 9, 2023 – Today, Blockchain Association submitted a letter to the U.S. House Committee on Financial Services outlining fundamental principles for effective stablecoin legislation. Regulatory clarity is critical to ensure that the United States remains the world leader in the development of blockchain technology and to protect investors and consumers from the risk of harm. Elected representatives – not regulators – can and should decide these regulations. As a starting point for Congress, below are five principles for consideration industry believes are essential components of a balanced bill:
- Stablecoin legislation should focus on applying tailored regulatory standards to “custodial” stablecoins, meaning those issued, maintained, and redeemed by a firm responsible for holding assets backing the stablecoins in a bank or other financial institution. Other types of stablecoins function in materially different ways that warrant further study and thoughtful analysis before they are ready to be addressed in legislation.
- Both insured depository institutions and non-bank firms should be allowed to issue stablecoins, subject to regulatory compliance obligations tailored for each category of issuer. Forcing all stablecoin issuers to obtain bank charters would severely restrict innovation without any attendant regulatory benefit, since stablecoins issued by properly-regulated non-bank firms will be equally safe and sound as those issued by banks.
- Assets held by stablecoin issuers as backing for stablecoins should be limited to specified, high-quality, liquid assets that meet a minimum standard of safety and soundness. The federal regulator authorized to oversee stablecoin issuers should also be allowed to approve other assets at their discretion.
- Stablecoin issuers should be subject to operational requirements, such as making public disclosures regarding assets held as backing for stablecoins, segregating those assets from corporate funds, implementing clear policies and procedures regarding issuance and redemption of stablecoins, and conducting routine audits or evaluations by registered public accounting firms.
- Stablecoins should be overseen by a prudential regulator such as the Federal Reserve System or the Office of the Comptroller of the Currency, and should be exempt from overlapping regulation by the Securities and Exchange Commission or the Commodity Futures Trading Commission, so as to provide regulatory clarity and clear delineation of responsibility between agencies.
Effective stablecoin legislation will only come from a bipartisan effort of Congress. Blockchain Association – and its more than 100 members – stand ready as a resource for the House Financial Services Committee and all of Congress on this critical issue for the United States.