President's Working Group on Financial Markets and Federal Banking Regulators Issue Report on Stablecoins
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Key takeaways:
- The Report on Stablecoins, issued on November 1, 2021 by the President’s Working Group on Financial Markets, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency, warns of prudential, including systemic, risks posed by the increased use of stablecoins as a means of payment. The report conveys a sense of urgency around the creation of a comprehensive legal framework for regulating stablecoins.
- The report recommends, among other measures, that Congress promptly enact legislation requiring stablecoin issuers to be insured depository institutions and subjecting custodial wallet providers to appropriate federal oversight. In the absence of congressional action, the report suggests the Federal Stability Oversight Council should consider using its existing authority to designate certain stablecoin activities as systemically important payment, clearing and settlement activities.
- This Debevoise In Depth outlines the report’s key takeaways and summarizes the regulators’ concerns around these risks, core legislative recommendations and recommendations for interim measures. It also addresses critical topics like illicit finance and regulation of digital asset trading and DeFi platforms and analyzes potential policy alternatives.