WASHINGTON — Lawmakers on the Senate Banking Committee on Tuesday laid out disparate visions for the future of stablecoin regulation, with Republicans lauding the potential for innovation while Democrats stressed the need for greater consumer protection.
Convening to discuss a
“We need a strong, proactive approach from regulators and Congress to limit stablecoins’ risks for working Americans,” Senate Banking Chair Sherrod Brown, D-Ohio, said in his opening remarks. “As our economy continues to recover from COVID-19 — as workers are finally starting to see higher wages and more bargaining power in the workplace — the last thing we need is for a risky new financial product to cause disaster.”
Brown also picked up on
On Tuesday, Brown asked Liang if there was “anything right now stopping Amazon or Walmart or another big company from starting their own stablecoin.” Liang responded by saying “because stablecoin issuers are licensed by state money-transmitter requirements, there is nothing that stops a commercial company from wanting to issue a stablecoin.”
Meanwhile, Sen. Pat Toomey of Pennsylvania, the ranking Republican on the banking committee, highlighted the potential good that a mature stablecoin sector could one day provide American citizens. Such an instrument “could improve upon traditional forms of money by increasing payment speed, especially cross-border transfers, reducing transaction costs, and helping to combat illicit finance through an immutable and transparent transaction record,” he said.
Toomey also echoed his Republican counterparts in the House last week, who were broadly skeptical that stablecoin issuance should be limited exclusively to banks as the working group had recommended.
“I strongly disagree with that recommendation,” Toomey said. Risks such as a run on stablecoin reserves could be dealt with "through a less restrictive and more appropriately tailored approach.”
Toomey also emphasized his support for existing state oversight of stablecoins. “To disrupt this regime would both introduce unnecessary burdens to an emerging technology and unwisely diminish the success of states with experience and expertise in this area,” he said.
Tuesday's hearing coincided with the
Gottheimer's bill would also make the Office of the Comptroller of the Currency the primary regulator of stablecoin issuers. The agency would be required by law to "issue rulemakings for issues such as leverage ratios, auditing requirements, anti-money-laundering/know-your-customer compliance, redemption requirements, liability management standards, and interoperability," according to a news release by Gottheimer's office describing the bill.
The enactment of significant federal crypto legislation remains a remote possibility for Congress in the near term. But some senators quizzed Liang on what federal regulators may seek to do in the interim — in particular, whether the Financial Stability Oversight Council may seek to designate the stablecoin sector as a source of “systemic” financial risk.
Sen. Bill Haggerty, R-Tenn., noted that the “stablecoin market is much smaller than many of the systemic important financial market utilities” designated by FSOC in the past. (Under the Obama administration, a handful of the nation’s largest insurance firms, including Prudential Finance and MetLife, were briefly designated as systemically important.)
Liang responded by saying that FSOC’s crypto analysis to date had focused on “digital assets more broadly” and that it was “a little early to prejudge” whether stablecoins represented a current threat to financial stability.
But Sen. Elizabeth Warren, D-Mass., pressed Liang on FSOC’s power to police stablecoins, asking why FSOC didn’t act more quickly to regulate the sector before it became an existential threat in the first place.
“Do you agree that these kinds of risks mean that stablecoins are not just an emerging threat to our financial system, but a threat that could become systemic if this market continues to grow rapidly?” Warren asked.
Liang acknowledged that there was “some urgency to considering stablecoins and applying the appropriate regulations” to reduce financial stability concerns.
Warren then pointed to
Liang said that FSOC had a “responsibility to look at the tools it has” and given how quickly the sector was growing, she reiterated that it would be “difficult to prejudge how they would be used.”
“Are you willing to use them ahead of Congress?” Warren asked.
“If it is assessed that they are a systemic threat that needs to be addressed,” Liang responded. Warren, apparently unsatisfied with her answer, said she was worried the Treasury Department was “approaching the crypto market with blinders on.”
“Congress needs to put guardrails around crypto, and I’m writing a bill to do just that,” Warren said. “But there’s no reason to delay. Pointing a finger at Congress does not give you or FSOC the right to ignore your statutory responsibilities.”
