The SEC’s monopoly over control of the “systematically important” stablecoin industry was denied. On November 1, the US President’s Financial Markets Working Group (PWG) released its highly anticipated report (Download Report PDF) and policy recommendations for stablecoins. The report focuses on the risks that “payment stablecoins” – or those designed to provide stable value against a reference fiat currency – can pose to users and financial stability.
An important message from PWG is that, although the use of stablecoins is currently largely limited to simplifying digital asset transactions, under certain circumstances this asset class could become much more prevalent in retail, necessitating the adoption by congress of a comprehensive federal prudential regulation system.
The PWG consists of the leaders of the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and the Federal Reserve and is led by the Secretary of the Treasury Department. The Federal Deposit Insurance Corporation (FDIC) and the Office of the Currency Controller (OCC) also contributed to the preparation of the interagency report. With such a large concentration of federal financial regulators, the results of their joint efforts were expected to provide a credible indication of the current administration’s stance on stablecoin regulation. Anonymous reports that surfaced shortly before the document was released claimed that the group had agreed to a plan to hand over significant power over stable tokens to the SEC. This further increased tensions around the interagency report.
The prospect of the SEC taking the lead in regulating the stablecoin is not encouraging for some players in the crypto space. K. Neil Gray, a partner at law firm Duane Morris, said before the report was released:
“Industry participants probably perceive the SEC’s desire to take a position in this space as another example of the SEC’s over-spreading in the cryptocurrency space and fear that the SEC will regulate stablecoins by enforcement rather than rule.”
Disclaimer: What is written here is not investment advice. Cryptocurrency investments are high-risk investments. Every investment decision is under the individua
