Although the SEC was denied monopoly authority for stablecoins, the potential of being deemed “systemically essential” remains.
The US President’s Working Group on Financial Markets (PWG) presented its long-awaited study and policy recommendations on stablecoins on Nov. 1. The document’s primary emphasis is on the prudential concerns that “payment stablecoins” — or those intended to keep a constant value in relation to a reference fiat currency — may pose to users and financial stability.
The PWG’s central message is that, although stablecoins are now used primarily to facilitate digital asset transactions, under certain circumstances, the asset class might gain widespread retail acceptance, requiring the enactment of a full federal prudential framework by Congress.
The PWG is chaired by the Secretary of the Treasury and includes the leaders of the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and the Federal Reserve System. Also contributing to the interagency study were the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC).
Given this powerful concentration of federal financial regulators, the outcome of their collaborative effort has been anxiously awaited as a trustworthy indicator of the current administration’s position on stablecoin regulation.
According to anonymous claims that surfaced just before the document’s release, the group had agreed on a proposal to delegate major responsibility for stable tokens to the SEC. This contributed to the tension surrounding the interagency report since such a regulatory designation would entail reclassification of the underlying asset class.
The possibility of the SEC taking the lead on stablecoin regulation has unnerved certain participants in the crypto sector. C. Neil Gray, a partner at legal firm Duane Morris, told Cointelegraph ahead of the report’s publication:
“Industry participants likely see the SEC’s push to take point in this area just as another example of SEC overreach in the cryptocurrency space, and fear that the SEC will regulate stablecoins by enforcement rather than by rule, as some perceive it to be doing in other areas.”
However, for compliant crypto participants, any degree of assurance is preferable to the absence of it. Sujit Raman, a partner in the law firm Sidley’s privacy and cybersecurity practice and a former assistant deputy attorney general at the United States Department of Justice, said that more clarification on the boundaries of each regulator’s obligations was still desired. Raman observed:
“In the absence of new legislation, stablecoins will continue to fall under the concurrent and perhaps conflicting authority of a variety of federal and state regulatory regimes. That is why it is critical for key government authorities to get an agreement on who would take the lead in regulating stablecoins.”
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