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Biden’s report on Stablecoins Misses the Mark

Cato Institute | Norbert Michel | Nov 5, 2021

stablecoin regulatiion - Biden's report on Stablecoins Misses the Mark

Image: Be-in-Crypto

Rather than provide concrete proposals and guidelines for federal agencies to implement immediately, the report urges Congress to pass a new law.

The President’s Working Group on Financial Markets released a new report on stablecoins this week. On the surface, the Biden administration punted. Dig deeper, and the details make the policy whiff look much worse.

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For starters, the report fails to provide the regulatory clarity that the crypto industry has been seeking for years. Rather than provide concrete proposals and guidelines for federal agencies to implement immediately, the report urges Congress to pass a new law.

The report even disappointed groups that typically support more regulation. Todd Phillips, the director of financial regulation at the Center for American Progress, told American Banker “I think this is a very problematic report, in that the recommendations really just look at what Congress can do, and not the current authorities of the regulators.”

But this critique is minor compared to the details the report does provide.

Specifically, the administration wants new legislation to:

“limit stablecoin issuance, and related activities of redemption and maintenance of reserve assets, to entities that are insured depository institutions.” In case that’s not clear enough, the report reiterates that the bill should “prohibit other entities from issuing payment stablecoins.”

See: 

Biden’s PWG report on stablecoins and the verdict is….

Cato: A Simple Proposal for Regulating Stablecoins

Hester Peirce: Lawless in Austin

The administration apparently believes that stablecoins can harm their users and pose systemic risks, but that everyone should just wait for Congress to act. Even better, the administration wants Congress to force these supposedly risky stablecoins to be issued only by federally insured banks.

That’s mindboggling enough, but it takes supreme audacity to make this recommendation while also calling for new regulations to prevent stablecoins from leading to “an excessive concentration of economic power.”

All crypto innovation—just like most other advances in U.S. payments technology—has been taking place outside of the banking sector.

Preventing everyone outside the banking sector from issuing stablecoins removes a major threat of competition from the banking industry. It’s a move that makes no sense if the goal is to prevent excessive concentration.

The truly laughable part is that the logic implies the concentration of economic power is bad, but not when the federal government orchestrates it and forces taxpayers to clean up any of the potential mess.

(To give the administration credit, this twisted logic does appear consistent with the views of its nominee for the comptroller.)

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