OCC chief backs tighter regulation of stablecoin issuers

Issuers of “stablecoins” should be treated as depository institutions with mandatory deposit insurance. This view was expressed by the head of the OCC within the U.S. Treasury, Michael Hsu.

The official’s view reflects the idea developed by the President’s Working Group on Financial Markets (PWG), which is laid out in the report on risks associated with stablecoins.

The document published in November 2021. Members of the PWG included OCC staff. At congressional hearings in February, proposals were criticized.

According to the report, in addition to meeting capital and liquidity requirements, institutions will be subject to federal supervision.

In his remarks, Hsu rejected alternative regulatory options for stablecoin issuers. He explained that their implementation would increase the risk of the collapse of a given institution and sector contagion.

The head of the OCC conceded that full application of all requirements would be burdensome for stablecoin issuers that are solely involved in their issuance and custody of collateral.

The official also suggested that a tailored set of regulatory and supervisory requirements could balance stability with efficiency. This would be possible provided there is strict regulation of activity and risk profiles.

Earlier, Michael Hsu acknowledged that trust in stablecoins could rise with proper oversight. The regulator pledged in 2022 to publish additional recommendations regarding the integration of cryptocurrencies into banks’ product lines.

As noted in April 2022, SEC Chairman Gary Gensler urged tougher oversight of stablecoin issuers.

Earlier this year, the insured FDIC member financial institutions of the USDF Consortium announced plans to promote a regulated stablecoin.

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