On April 27, 2022, the Acting Comptroller of the Currency, Michael Hsu, issued a statement suggesting that the government should work together with the cryptocurrency industry and academics to develop uniform standards for stablecoins. Stablecoins are a type of digital token whose value is pegged to that of another currency, often a fiat currency such as the U.S. dollar.
In November 2021, a report issued by the U.S. Treasury's Working Group on Financial Markets found stablecoin standards were "urgently needed" and issuers should be subject to "appropriate federal oversight." Congress has also discussed a proposal for a state-centered regulatory approach for stablecoins, and Representative Pat Toomey has introduced a bill, the "Stablecoin TRUST Act," which would permit digital assets to be identified as "payment stablecoins" which would be exempt from many securities regulations. Mr. Hsu's statement provides additional weight for those advocating for the creation of uniform standards for stablecoins.
Currently the stablecoin space does not have a uniform set of standards, and different stablecoin issuers disclose that their stablecoin price is kept steady because their tokens are backed one-to-one with cash or cash equivalents, but there is limited transparency. Regulators have expressed concern that the lack of a uniform standard in the stablecoin space may cause investor confusion and may even cause investor harm in the event of an issuer's failure because they are not being held to the same standards as traditional banking services. In response to these concerns, Mr. Hsu stated he believes a standard-setting initiative similar to one undertaken by the Internet Engineering Task Force (IETF) and World Wide Web Consortium (W3C) needs to be established, with representatives from the crypto industry, government and academics. Such a standard-setting group may be able to help create uniform standards that are acceptable by both the industry and regulators.
DISCLAIMER: This article was originally published by McGonigle PC prior to their combination with Davis Wright Tremaine LLP. The article is published here with permission.