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US Government Releases Statement on Key Stablecoin Regulations
PAR002_123 • Dec 24, 2020
The White House Working Group on Financial Markets Releases Statement on Key Regulatory and Supervisory Issues Relevant to Stablecoins
The White House Working Group on Financial Markets (PWG) whose members include the heads of Treasury, the Federal Reserve, the Securities and Exchange Commission and the Commodity Futures Trading Commission released a statement detailing how it views retail payments and provided an initial assessment of key regulatory and supervisory considerations for participants in significant stablecoin arrangements that are primarily used for US retail payments.
The document released by the group of Trump-appointed officials is the latest move by the administration to apply longstanding financial rules to the fast-growing world of Cryptoasset driven finance.
The new report also said stablecoin issuers should be able to comply with sanctions obligations, maintain adequate cash reserves to enable one-to-one redemptions and highlighted the importance of anti-money laundering and counter financial terrorism measures, including on-chain know-your-customer (KYC) verification among all parties. This comes after the Financial Crimes Enforcement Network unveiled a proposed rule that would also create stringent KYC requirements for transactions between money service businesses and unhosted wallets.
Treasury Deputy Secretary Justin Muzinich said
“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. Regulators will continue to look closely at stablecoin arrangements, and look forward to future dialogue on these issues,”
Key Details:
- Stablecoins should meet the same regulatory standards as other aspects of the financial system.
- Must meet appropriate money-laundering and oversight requirements.
- Stringent KYC (Know your customer) requirements for transactions between money service businesses and unhosted wallets.
- Stablecoins may be securities, derivatives or commodities, depending on the specific qualities of a particular asset.
- Strong reserve management practices ensuring a 1:1 reserve ratio.
- Must be resilient enough to handle large-scale redemptions.
- Should also have strong risk management and cyber security protections.
Following the White House announcement, the largest regulator of US national Banks 'The Acting Comptroller of the Currency' praised the President’s Working Group Statement on Cryptocurrency in their latest News Release December 23, 2020 stating
“Today’s statement by the President’s Working Group on stablecoins clarifies expectations for the retail payment application of stablecoins, helping to pave the way for greater innovation and more efficiencies that contribute to economic opportunity.”
Acting Comptroller of the Currency Brian Brooks said
“In its wisdom, the group also remained agnostic regarding the technologies related to unhosted wallets, which helps the nation remain competitive by preserving industry’s ability to innovate in responsible ways and adapt to the market and consumer needs and preferences,”
This latest news paves the way for the U.S. to remain a financial leader
and for stablecoins to become a major part of the payments and settlement infrastructure of the financial system.
PWG Members welcome dialogue as U.S. authorities continue to assess the evolving technological and market landscape and U.S. regulatory framework with respect to stablecoins.
Sources:
Press Release | December 23, 2020
President’s Working Group on Financial Markets Releases Statement on Key Regulatory and Supervisory Issues Relevant to Certain Stablecoins (https://home.treasury.gov/news/press-releases/sm1223)
News Release 2020-177 | December 23, 2020
Acting Comptroller of the Currency Praises President’s Working Group Statement on Cryptocurrency (https://www.occ.treas.gov/news-issuances/news-releases/2020/nr-occ-2020-177.html)
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