US federal regulators set new expectations for stablecoin issuers

The President’s Working Group has not said anything revolutionary, but does establish some new clarity.

A group of leading U.S. financial regulators has released a new statement on stablecoins.

One of the headlining topics of crypto regulation news this year, stablecoins were the main topic of a Dec. 23 statement the President’s Working Group on Financial Markets, or PWG. The PWG includes representation from the Treasury, the Federal Reserve, the Securities and Exchange Commission, and the Commodity Futures Trading Commission. 

The group’s stated opinions were hardly revolutionary, mostly saying that stablecoin issuers would need to abide by all the typical rules of the road in terms of financial law. The regulators say that stablecoins need to have systems in place to abide by all applicable anti-money laundering requirements before coming to market. 

Morever, the regulators did not say that stablecoins are necessarily currencies or commodities, which are subject to less aggressive regulation than securities or derivatives. They instead left the question open:

“Depending on its design and other factors, a stablecoin may constitute a security, commodity, or derivative subject to the U.S. federal securities, commodity, and/or derivatives laws.”

The announcement quotes Treasury Deputy Secretary Justin Muzinich as saying, “The statement reflects a commitment to both promote the important benefits of innovation and to achieve critical objectives related to national security and financial stability.”

It is a frequent chorus among regulators handling new technologies, but especially those altering the function of money: Responsible innovation. But here it’s interesting to note a clarified expectation of stablecoin projects to have certain systems in place ahead of launch. 

Acting Comptroller of the Currency Brian Brooks said of today’s statement:

“The group reached a productive balance recognizing the valuable and important role stablecoins are playing in our national and global economies and the need to ensure such financial tools do not contribute to crime or national insecurity.”

Despite being fairly mild, the PWG outline a softer approach to stablecoins than some. A recent bill from Representative Rashida Tlaib sparked outrage among the crypto community for willingness to target node operators as money services providers. 

Similarly jarring to the crypto industry was an instance of midnight rulemaking from the Treasury itself, seeking to subject self-hosted wallets to Travel Rule thresholds for keeping record of ownership.

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