A quietly emerging consensus among key stakeholders is forming on the subject of regulating payment stablecoins, with the House Financial Services Committee’s Subcommittee on Digital Assets, Financial Technology, and Inclusion holding yet another hearing on the topic. The latest meeting and newly circulated drafts, including those from Chair Rep. Patrick McHenry and Ranking Member Rep. Maxine Waters, signal the House’s commitment to introducing and passing a bill in this area.
Despite differing opinions among Subcommittee members, there appears to be agreement on the urgent need for Congressional action on payment stablecoins, the distinction between them and other non-payment stablecoins, and the importance of dollar dominance and financial inclusion as critical public policy objectives advanced by the proper regulation and oversight of payment stablecoins.
However, the Securities and Exchange Commission (SEC) seems to be preparing to regulate payment stablecoins through a securities framework, contrary to Congressional activity on the subject. As a result, many argue that financial regulators should refrain from “front-running” Congress with regulation-by-enforcement.
Payment stablecoins are fiat currency representations on a blockchain, typically backed 1:1 by cash or cash equivalents and intended for payments, as they are easily redeemable or exchangeable for fiat currency. Since they resemble basic cash instruments, the good news is that the effective regulation of such assets already exists.
Moreover, there is strong bipartisan consensus to regulate payment stablecoins as cash instruments, rather than securities. The latest versions of the draft bills propose a prudential framework for regulating payment stablecoins, including important safeguards and limitations such as capital and reserve requirements, redemption timeframe requirements, limitations on commingling and rehypothecation, and treating payment stablecoin issuers as financial institutions subject to the Bank Secrecy Act and its AML/KYC requirements.
Despite SEC Chair Gary Gensler suggesting that payment stablecoins may be securities, most payment stablecoins are not marketed as dividend or income producing alternatives to bank deposits—
Source: Coindesk
