ABA Statement on Stablecoins Emphasizes Need for Consumer Protection

Customers accessing digital-asset markets, including stablecoins, are best served when they can do so through fully regulated banks, ABA said in a statement submitted for the record of a Senate Banking Committee hearing on stablecoins and their uses and risks. “The origins of cryptocurrency were driven by the desire to build a ‘trustless’ financial system, where parties can transact directly with each other without the need for a trusted third-party,” ABA wrote. “It is ironic, therefore, that as interest in digital assets such as stablecoins continues to grow, consumers engaging with digital assets most often seek out trusted financial institutions to act as financial intermediaries.”

To accommodate demand, banks are evaluating ways to allow customers to buy, hold and sell digital assets via existing banking relationships, ABA noted. Stablecoins, unlike other financial instruments, are not subject to a consistent, comprehensive set of regulatory standards that mitigate the risks they pose to consumers and the financial system.

ABA supports the recommendations in the recently released stablecoin report from the President’s Working Group on Financial Markets, together with the FDIC and OCC, including the key recommendations that stablecoin issuers be insured depository institutions subject to consolidated supervision and that custodial wallet providers be subject to appropriate federal oversight.

Additionally, ABA believes any regulatory action should: provide a clear and comprehensive definition of “stablecoin” that avoids loopholes and clearly differentiates it from other digital assets; recognize that stablecoin arrangements pose systemic risks, making regulation of stablecoin issues and other participants in the stablecoin ecosystem critical; encourage regulators to coordinate a comprehensive approach to prevent the rise of un- or under-regulated stablecoin issuers and platforms; and provide consistent treatment of banks and nonbanks that engage in similar stablecoin activity to ensure equal customer protection.