Treasury, Congress in talks on stablecoin proposals, official says

Biden administration officials and lawmakers have been holding talks in recent weeks about possible legislation to regulate stablecoins and other digital assets, the Treasury Department's Nellie Liang said Tuesday.

But she was vague about how much progress has been made.

“There’s sort of a general agreement that stablecoins are growing and there should be actions to reduce emerging systemic risk,” Liang, the under secretary for domestic finance, said during a panel discussion at the National Association for Business Economics policy conference in Washington. “So I’m confident that we’ll reach some consensus around some of these proposals somewhere.”

The Biden administration issued an executive order on digital assets two weeks ago that tasked the Treasury with conducting a series of reports on the emerging technology and working with other agencies as well as Congress on ways to promote its safe growth.

Win McNamee/Bloomberg

It followed a report in November by the President’s Working Group on Financial Markets, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. that recommended, among other things, stablecoin issuers obtain bank charters to guard against panicked runs in the event of a crisis. Mandating issuers hold bank charters would also prevent them from being controlled by commercial companies, the report said.

“We do think legislation for stablecoins is really important” to establish necessary safeguards, Liang said in reiterating congressional testimony she gave in early February. “The current regulatory system doesn’t address run risk in stablecoins, and it doesn’t address the whole payment provider infrastructure needed.”

However, she noted, the report emphasized “the flexibility that banking agencies have to adjust for differences between stablecoin issuers and traditional commercial banks that also make loans.”

Liang spoke about the potential of digital assets to promote financial inclusion — another key feature of the Biden administration’s cryptocurrency-related goals.

“We recognize that new forms of money are gaining popularity, in part because existing forms of money and payments had some weaknesses,” she said.

But she said there are additional routes to address unequal access to the financial system and the high cost of financial services for some groups. She cited the FedNow system, a payments platform being developed by the Federal Reserve, that “will be low cost to users.”

She also stressed an activities-based approach supervision: “Regulatory policies for new financial products may need to evolve, but they should follow the ‘same risk, same regulation’ in the sense that regulation should be based on the risks of the activity, rather than the technology itself.”