US federal regulators set new expectations for stablecoin issuers

Published at: Dec. 23, 2020

A group of leading U.S. financial regulators has released a new statement on stablecoins.

One of the headlining topics of crypto regulation news this year, stablecoins were the main topic of a Dec. 23 statement the President’s Working Group on Financial Markets, or PWG. The PWG includes representation from the Treasury, the Federal Reserve, the Securities and Exchange Commission, and the Commodity Futures Trading Commission. 

The group's stated opinions were hardly revolutionary, mostly saying that stablecoin issuers would need to abide by all the typical rules of the road in terms of financial law. The regulators say that stablecoins need to have systems in place to abide by all applicable anti-money laundering requirements before coming to market. 

Morever, the regulators did not say that stablecoins are necessarily currencies or commodities, which are subject to less aggressive regulation than securities or derivatives. They instead left the question open:

"Depending on its design and other factors, a stablecoin may constitute a security, commodity, or derivative subject to the U.S. federal securities, commodity, and/or derivatives laws."

The announcement quotes Treasury Deputy Secretary Justin Muzinich as saying, “The statement reflects a commitment to both promote the important benefits of innovation and to achieve critical objectives related to national security and financial stability."

It is a frequent chorus among regulators handling new technologies, but especially those altering the function of money: Responsible innovation. But here it's interesting to note a clarified expectation of stablecoin projects to have certain systems in place ahead of launch. 

Acting Comptroller of the Currency Brian Brooks said of today's statement:

"The group reached a productive balance recognizing the valuable and important role stablecoins are playing in our national and global economies and the need to ensure such financial tools do not contribute to crime or national insecurity."

Despite being fairly mild, the PWG outline a softer approach to stablecoins than some. A recent bill from Representative Rashida Tlaib sparked outrage among the crypto community for willingness to target node operators as money services providers. 

Similarly jarring to the crypto industry was an instance of midnight rulemaking from the Treasury itself, seeking to subject self-hosted wallets to Travel Rule thresholds for keeping record of ownership.

Tags
Regulation
Sec
Us Government
Stablecoin
Cftc
Aml
Brian Brooks
Related Posts
Law Decoded: Infrastructure woes and benevolent punishments, Sept. 27–Oct. 3
This week, United States lawmakers and regulators have stolen much of the spotlight once more. The cryptocurrency-related provisions of the infrastructure bill, a tiny grain of sand in the grand scheme of the omnibus legislation, had all laser eyes glued to the fateful House of Representatives vote — which never happened. There is a sense, however, that the bill will become law sooner rather than later. We have also learned from Federal Reserve Chair Jerome Powell testifying to Congress that the Fed sees no use in a China-style blanket ban on cryptocurrency, eyeing tighter regulation of stablecoins instead. The latter …
Regulation / Oct. 4, 2021
SEC expected to head U.S. stablecoin regulation and enforcement
U.S. regulatory bodies have reportedly agreed that the Securities and Exchange Commission (SEC) will lead the United States’ efforts to regulate the stablecoin sector. According to an Oct. 26 Bloomberg report citing anonymous sources “familiar with the matter,” the SEC has reached an agreement with other U.S. agencies to take the reins on proposing legislation and overseeing the stablecoin industry. The sources add that the SEC’s newfound “significant authority” over the sector will be formally announced in the Treasury Department’s forthcoming stablecoin report that is scheduled to be published this week. The report will also clarify the regulatory jurisdiction of …
Regulation / Oct. 26, 2021
U.S. Congressman calls for ‘Broad, bipartisan consensus’ on important issues of digital asset policy
In a letter to the leadership of the United States House Financial Services Committee, ranking member Patrick McHenry took a jab at “inconsistent treatment and jurisdictional uncertainty” inherent in U.S. crypto regulation and called for the Committee to take on its critical issues. McHenry, a Republican representing North Carolina, opened by mentioning that the Committee’s Democrat Chairwoman Maxine Waters is looking to schedule additional hearings addressing matters pertinent to the digital asset industry. He further stressed the need for identifying and prioritizing the key issues and achieving a “broad, bipartisan consensus” on the matters affecting the industry that holds immense …
Regulation / Jan. 25, 2022
Fear of the unknown: A tale of the SEC’s crusade against synthetics
On the opening day of Messari Mainnet 2021, New York City’s long-awaited first crypto conference since the start of COVID-19, reports came blazing in via a viral tweet that the United States Securities and Exchange Commission had served a subpoena to an event panelist at the top of an escalator in broad daylight. While it’s still not entirely clear who was served (or why), this isn’t the first time the SEC has encroached upon the crypto industry in full view of the public. Let’s go back a mere two months. On July 20, 2021, SEC Chair Gary Gensler issued his …
Decentralization / Oct. 23, 2021
How the Democratic Party didn’t stop worrying and fearing crypto in 2021
As 2022 is kicking off, America nears the first anniversary of Joe Biden’s presidency. Following the tenure’s ambitious start, the last few months witnessed some serious tumult around the overall health of the United States economy, the administration’s handling of the COVID-19 pandemic, and the tense debate around Biden’s opus magnum — the $1.7 trillion Build Back Better infrastructure legislation plan. But even as the Democrats’ ability to maintain undivided power after the 2022 midterm elections can raise doubts, the party’s prevailing view of crypto has become more consolidated than ever. The incumbent president’s party will be setting the tone …
Regulation / Jan. 1, 2022