On July 16, 2021, Secretary of the Treasury Janet Yellen announced that the President’s Working Group on Financial Markets (PWG), the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation (FDIC) would all convene to discuss interagency work on stablecoins this upcoming July 19. A stablecoin is a type of cryptocurrency that is backed by a reserve asset, which could be a fiat currency like the U.S. dollar, gold, or other cryptocurrencies, and which attempts to offer more price stability compared to the volatility often present in other cryptocurrencies.
The goal of the meeting and the PWG is to examine the current regulation of stablecoins, identify any existing and potential risks, and develop recommendations to address those risks. The meeting aims to build upon the PWG’s December 2020 “Statement on Key Regulatory and Supervisory Issues Relevant to Certain Stablecoins” (the “Statement”). The Statement provided the following initial assessment on key regulatory and supervisory considerations regarding stablecoins:
- The U.S. encourages responsible payment innovations
- Stablecoins must comply with applicable U.S. legal, regulatory, and oversight requirements, including but not limited to “safety and soundness, countering illicit finance, end-user protection, and market integrity”
- Participants and arrangements of stablecoins must meet all applicable anti-money laundering and countering the financing of terrorism (AML/CFT) and sanctions obligations, including potential registration with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN), implementation of an effective AML program, and complying with record-keeping requirements and suspicious activity reporting
- Some stablecoins may constitute a security, commodity, or derivative subject to U.S. federal securities, commodities, and/or derivatives laws
- Stablecoins that are primarily used for retail payments and adopted at a significant scale may require additional safeguards
- U.S. authorities will continue to assess evolving technology and market landscapes as well as the U.S. regulatory framework for stablecoin oversight
- Authorities will pursue robust international collaboration in matters related to stablecoins
The PWG was created to strengthen U.S. financial markets and its current members include Treasury Secretary Yellen, Chair of the Board of Governors of the Federal Reserve Jerome Powell, Chair of the Securities and Exchange Commission (SEC) Gary Gensler, and Acting Chairman of the Commodity Futures Trading Commission (CFTC) Rostin Behnam.
A press release of Secretary Yellen’s July 16 announcement is available here.