Stablecoins are unique types of digital tokens that have emerged out of the cryptocurrency revolution and have taken center stage in the debate about crypto regulation. Tied to the value of an asset or fiat currency such as the dollar, stablecoins were initially created to ease the trade between different cryptocurrencies and crypto exchanges. Yet they have taken on innovative and beneficial new uses that both increase financial inclusion at home and provide vital assistance to those facing oppression and financial instability, as some argue that the situation in Ukraine demonstrates.
But as stablecoins gain prominence, concerns have arisen over risks they might pose to the financial system. Some, such as Senate Banking Committee Ranking Member Pat Toomey, have argued for light-touch regulation for stablecoin issuers that would simply require disclosure of reserves and redemption policies. Others have called for strict bank-like regulation on stablecoins with reserve requirements that specify the amount of assets stablecoin issuers must hold and backstop guarantee programs similar to deposit insurance. The President’s Working Group on Financial Markets of the Biden Administration recently recommended that federal laws should only allow stablecoins to be issued by “insured depository institutions” such as banks and savings associations. The Securities and Exchange Commission (SEC) is also sending signals that it considers stablecoins as well as other cryptocurrencies to be “securities,” and will subject them to regulatory enforcement under securities laws, despite, as some argue, the lack of clear authority by Congress.
This webinar explored the potential of stablecoins as a payment instrument, the inefficiencies of the current payment system, and the appropriate level of regulation that allows for beneficial innovation in this sector.
- Paul Jossey, Principal Attorney, Jossey PLLC
- Timothy Massad, Consultant; Adjunct Professor of Law, Georgetown Law
- [Moderator] John Berlau, Senior Fellow & Director of Finance Policy, Competitive Enterprise Institute
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As always, the Federalist Society takes no position on particular legal or public policy issues; all expressions of opinion are those of the speaker.