The group said stablecoin issuers should be held to the same standards as insured depository institutions including state and federally chartered banks.
The President’s Working Group on Financial Markets, or PWG, has released a report suggesting that stablecoin issuers in the United States should be subject to “appropriate federal oversight” akin to that of banks.
A Nov. 1 U.S. Treasury report from the group with the Office of the Comptroller of the Currency and Federal Deposit Insurance Corporation said Congress should “act promptly to ensure that payment stablecoins are subject to appropriate federal prudential oversight on a consistent and comprehensive basis.” The government agencies said stablecoin issuers should be held to the same standards as insured depository institutions including state and federally chartered banks and savings associations as they protect customers’ deposits and limit “any potential negative systemic impacts in the event of bank failure.”
The report did not specify under which federal agency stablecoin and digital asset trading fell, but said the Securities and Exchange Commission, or SEC, as well as the Commodity Futures Trading Commission, or CFTC, had “broad enforcement, rulemaking, and oversight authorities” to address such transactions and companies within the crypto space. However, the PWG suggested the risks concerning stablecoins would likely grow as the space developed and may sometimes fall “outside of the regulatory perimeter” of the SEC and CFTC.
“Because payment stablecoins are an emerging and rapidly developing type of financial asset, legislation should provide regulators flexibility to respond to future developments and adequately address risks across a variety of organizational structures,” said the report.
While the group said it believes this legislation is “urgently needed to comprehensively address the prudential risks posed by payment stablecoin arrangements,” it said federal agencies should continue to use their authority to address risks within the crypto space if and when Congress chooses to act. Should there fail to be congressional action, the PWG recommended the Financial Stability Oversight Council step in to establish additional regulatory standards for stablecoins.
Many stablecoin issuers and companies in the crypto space participated in the discussions leading to the report. The PWG list of exchanges included Coinbase and Gemini, as well as stablecoin issuers Tether, Paxos, and the Diem Association.
The release of the Treasury report follows a seeming legislative tug-of-war between U.S. government agencies on stablecoins. In September, Gary Gensler hinted that both the SEC and CFTC would benefit from congress assistance in regards to regulation and enforcement of stablecoins, but a subsequent report from Bloomberg suggested the SEC was taking the reins on proposing legislation and overseeing the sindustry.