Senators Split Over U.S. Treasury Report on Stablecoins

Three US senators — Sherrod Brown, Pat Toomey and Cynthia Lummis — published responses to the Treasury’s report on the risks associated with stablecoins. Their statements could form the basis for upcoming debates.

In previously published document the report notes threats to investors and market integrity from “stablecoins,” as well as stringent regulatory restrictions.

Republicans Toomey and Lummis sit on the Senate Banking Committee chaired by Brown (the Democratic Party). In Brown’s view, the PWG report “highlights the risks that the rapid growth of stablecoins poses for families and the economy.”

“We must work so that any new financial technologies fall under the scope of all laws and regulations protecting investors, consumers and markets, and that they compete on a level playing field with traditional financial institutions,” is said in the statement.

Brown expressed willingness to work with Treasury Secretary Janet Yellen and regulators “to foster responsible innovation in the financial system.”

Lummis backed some PWG recommendations but called the push to treat stablecoin issuers as depository institutions with federal deposit insurance erroneous.

“There are other, safer ways to achieve the same goals. For example, we could require that 100% of stablecoin reserves be kept off the balance sheet, or held at the Federal Reserve Bank […]. I am concerned that the recommendation will benefit only large banks and stifle innovation,”

My thoughts on the President’s Working Group Report on Stablecoins ➡️➡️➡️ https://t.co/zSxM7w8Diq

— Senator Cynthia Lummis (@SenLummis) November 1, 2021

The senator also noted that, according to the report, “the final word will and should be with Congress.”

To this, Toomey also pointed out:

“As the Biden administration notes in its report, Congress must clarify whether federal agencies have jurisdiction over stablecoins and to what extent.”

He expressed hope that the administration “will resist the push to expand existing legislation” while Congress works on a “careful” regulatory framework.

SEC Chair Gary Gensler also weighed in. He noted that, over the past 20 months, the stablecoin market “has grown twentyfold” and is valued at nearly $130 billion.

The authors of the report acknowledged that stablecoins “may be securities, commodities and/or derivative instruments,” said the SEC chair.

“Thus, the use of stablecoins poses a number of policy challenges for federal policy in the context of investor protection,” said Gensler.

According to him, the SEC and the CFTC will fully apply the Securities Act and the Commodity Exchange Act to stablecoins, where feasible.

Michael Hsu, acting Comptroller of the Currency in the U.S. Treasury Department, backed the recommendations contained in the report.

“The rapid growth of stablecoins as an innovative and unregulated means for participating in speculative trading of digital assets and lending alike inspires fear and concern. … For stable growth and development, prudent federal government oversight of stablecoins is needed,”

Recall that, at a July meeting the Federal Reserve said that the lack of transparency around stablecoins could threaten financial stability.

That same month, Yellen urged the swift creation of a regulatory framework for “stablecoins.” In September, the first excerpts of the final document appeared .

In the same month, Gensler pointed to the risk of broad use of stablecoins. He also called them “poker chips for a crypto-casino”.

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