According to The Block, in two letters co-signed by the American Bankers Association (ABA) last week, industry organizations representing banks and credit unions objected to parts of the comprehensive regulatory framework for stablecoins that the House Financial Services Committee will debate and vote on Thursday.
Parts of the bill currently allow state financial regulators to approve the issuance of stablecoins, an outcome that has drawn criticism from the ABA, the Consumer Bankers Association (CBA) and the Credit Union National Association (CUNA). Worry. In a separate letter from the ABA, 49 state bank associations and bankers in Puerto Rico raised similar concerns.
“To ensure effective consumer protection and financial stability, the stablecoin ecosystem must be subject to the same robust regulation as the banking ecosystem,” the ABA and state bankers associations wrote. The associations added that they want “federal regulation of states Licensing stablecoin issuers to the same degree of oversight that currently applies to state-chartered banks.”
Similarly, the ABA, CBA, and CUNA expressed concern that the bill’s approach to state regulatory approval increases “arbitrage” and “systemic risk,” and called for stablecoin issuers to be subject to the same federal oversight as banks and credit unions.
“Given these entities’ intent to create new currencies, we believe they should be subject to at least the same form of federal regulation as state-chartered banks and credit unions,” the three national trade associations wrote. “However, the draft legislation imposes key limitations on the role of federal regulators in approving and overseeing state-licensed payment stablecoin issuers and creates opportunities for regulatory arbitrage for nonbank entities to seek the ‘best’ regulatory regime on a state-by-state basis. Moreover, states are unlikely to be ready to regulate stablecoins on their own, particularly given the rapid expansion of stablecoin issuers and the ability of global stablecoins to facilitate international payments.”
The groups are also calling for provisions to be included in the stablecoin bill that would require regulatory review and third-party audits of reserves, and to explicitly prohibit or at least limit the ability of commercial companies to own or control payment stablecoin issuers, similar to what exists in the United States. Separation provisions between commercial companies and banking companies.
Early Tuesday morning, House Financial Services Committee Chairman Patrick McHenry postponed the committee’s scheduled debate on the stablecoin bill until Thursday, while the committee will still consider market structure legislation on Wednesday.