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🇺🇸 The US President’s Task Force published a report on stablecoins
On November 1, the President’s Financial Markets Working Group (PWG) announced a stable money report in cooperation with the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC). Stablecoins have a total value of over $100 billion. Agencies have recognized the benefits that stablecoins could bring to the payment system. Namely, that “stable coins could support faster, more efficient and more inclusive payment options.” Three distinct functions have been identified in the stablecoin ecosystem:
- Creation and redemption of stable money;
- Transfer between parties; and
- Storage of stable coins by users.
From these functions, the PWG identified a number of risks that require regulatory oversight by the agencies:
- Loss of value: If the underlying asset collapses, the beneficiaries will face a loss of value. Furthermore, lack of transparency regarding underlying assets, cyber threats and inadequate safekeeping of stablecoins are cited as causes of PWG’s loss of value.
- Payment System Risks: Regulators are concerned that depending on governance arrangements and technical infrastructure, certain stablecoins may be less efficient than current centrally managed payment operations. The lack of responsibility of an organization is cited as an obstacle by the agencies.
- Scale risks: Regulators are increasingly concerned about the financial stability risks posed by cryptoassets. Stablecoins are no exception. First, if a large amount of stablecoin is stored on a single platform, its problem could interfere with stability. Second, commercial firms that issue stablecoins or partner with a stablecoin issuer could collect information about their users and gain excessive market power. Third, the agencies suggest monitoring the competition between stablecoins and the costs users may face when switching to other payment methods.
The report is pressing Congress to enact federal regulation to provide a consistent framework for the oversight of stablecoins. The key recommendations are as follows:
- Establish a framework between existing federal agencies to cover the risks associated with stablecoins on a “consistent and comprehensive basis.”
- Implement capital and liquidity standards for depository institutions to address financial stability issues.
- Consider federal oversight of actors that pose systemic risks and/or concentrate economic power in a stable ecosystem, such as custodial wallet providers.
While the new law would likely take a long time to pass, the report states that stablecoin activities are already subject to existing AML/CFT regulations due to “illegal financial risk”. The PWG emphasizes that “most stablecoins are considered ‘convertible virtual currency’ (CVC) and are treated as a ‘value that replaces currency’ under FinCEN regulations.” Furthermore, cryptocurrency platforms are reminded that “stable coin addresses and transactions on public blockchains may be matched with information, if available, that may allow regulators and law enforcement to identify the owners of the addresses.” To learn more about how Elliptic’s blockchain analytics solutions can help you manage the risks associated with stablecoins, schedule a demo.
Officials of the Indian Ministry of Finance are he told a local newspaper that cryptoassets are likely to be regulated in India by February 2022. This is a significant improvement over previous government plans ban crypto assets. As the second most populous country in the world, this announcement creates a significant market opportunity. To learn more about how your business can use Elliptic’s tools to comply with AML/CFT requirements in anticipation of new requirements in India, schedule a demo.
Following the announcement that a bitcoin Exchange Traded Fund (ETF) was launched on the New York Stock Exchange last month, Australian regulators have followed in the footsteps of their American counterparts. The Australian Securities and Investments Commission (ASIC) has approved cryptoasset traded products (ETPs). This will allow investors to gain exposure to cryptoassets through traditional exchanges. ASIC has updated its information sheet on ETPs to clarify which cryptoassets are considered permissible. It is up to market operators to make judgments about which cryptoassets meet the requirements of a mature ASIC spot market. So far, it suggests that Bitcoin and Ether are likely candidates for the ETP’s underlying assets. Meanwhile, Australian Senator Andrew Bragg made a statement welcoming the introduction of cryptoassets. He also shared his ambitions to have all twelve recommendations of the Senate’s cryptoasset reform agenda (covered here) implemented in the near future.
Astana Financial Services Authority (AFSA) has introduced borders regarding the amount of cryptoasset that retail investors can purchase. Without providing proof of income, monthly crypto-asset investments will be limited to $1,000. This restriction can be removed if local investors provide proof of income or property ownership (excluding their main residence). They will then be able to invest 10% of their annual income or 5% of their assets up to $100,000. AFSA told reporters that the measures are aimed at mitigating the loss of capital. These efforts are resonating comments from the Deputy Governor of the Bank of England on Cryptoassets and Financial Stability Risks.
