We are rapidly approaching the end of 2021 but policymakers are not letting up in terms of their approach to crypto. Last week’s letter to stablecoin issuers is yet another step in this ongoing story.
When stablecoin rules?
Last week, U.S. Sen. Sherrod Brown (D-Ohio) sent letters to a handful of stablecoin issuers asking for more information about their issuances, governance, consumer protection policies and more. It’s the latest move in an escalating effort by lawmakers, particularly the Senate Banking Committee chairman, to understand and evaluate stablecoins.
Why it matters
Lawmakers are grappling with stablecoins worldwide, but we’re starting to see movement from just asking questions to the beginnings of actual policy proposals and potential laws. In that light, the questions Brown is asking stablecoin issuers could identify what issues might fall into the explicitly defined regulatory landscape.
Breaking it down
Roughly summarized, the questions ask:
- How customers can acquire the stablecoins;
- How customers can redeem the stablecoin;
- How much of the stablecoin has been issued;
- What might prevent a customer from purchasing the stablecoin;
- Whether any trading platforms have “special arrangements” with respect to the stablecoin;
- How specific levels of redemption might impact the issuer;
- How an exchange might evaluate forks.
Some letters had more questions than others, such as those to Coinbase and Gemini.
“I have significant concerns with the non-standardized terms applicable to redemption of particular stablecoins, how those terms differ from traditional assets, and how those terms may not be consistent across digital asset trading platforms,” Brown wrote in several of the letters.
The letters came a month after Brown, with a handful of other Democrat senators, wrote to Facebook, ordering it to halt its announced Novi pilot program as well as any work on the diem stablecoin project.
At the time, the lawmakers wrote that Facebook could not be trusted with customer data although, interestingly, this was not an issue discussed in last week’s letters.
Brown’s letter referenced the President’s Working Group on Financial Markets’ report on stablecoins, which the group published at the beginning of November.
In a similar vein, the Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation and Federal Reserve published their joint sprint team timeline last week, announcing when they plan to announce further clarity around bank interactions with crypto, including stablecoin issuance.
Given a) the PWG’s recommendation that stablecoin issuers be regulated similarly to national banks and b) the PWG’s recommendation that Congress cement this proposal through legislation, it’s very possible that last week’s letters are a first step toward this regulation.
Changing of the guard
Five Democrat senators have expressed their opposition to OCC nominee Saule Omarova, Axios reported last week. The already contentious nomination has faced headwinds since being announced, and this state of affairs doesn’t look likely to change.
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