Acting Comptroller of the Currency Michael Hsu today called for establishing an “intentional architecture” for stablecoins that would focus on “stability, interoperability and separability,” and also take into account privacy, security and the need to prevent illicit finance. Speaking at an industry event, Hsu suggested that well-regulated bank-issued stablecoins may be preferable to a CBDC as policymakers consider supporting the U.S. dollar’s international role. He noted that the nation’s current bank-centric model is “not an accident. It is the result of a carefully architected monetary and banking system [which]has supported the role of the U.S. dollar as the world’s reserve currency.”
Hsu also appeared to express a preference for a bank-like “fixed set of safety and soundness-like requirements” that would apply to all stablecoin issuers—as opposed to offering a wider set of licensing options. “[T]he wider the variability, the more likely a risky issuer blows itself up, sparking contagion across peers,” he cautioned.
Additionally, there is a need for interoperability among U.S. dollar-based stablecoins, he said, noting that “in the long-run, interoperability between stablecoins and with the dollar—including a CBDC—would help ensure openness and inclusion. It would also help facilitate broader use of the U.S. dollar—not a particular corporate-backed stablecoin—as the base currency for trade and finance in a blockchain-based digital future.”
Finally, Hsu raised the issue if intraday liquidity risk if banks were to being transacting in both traditional payments and blockchain-based payments. To address this problem, he floated the idea of “requir[ing]that blockchain-based activities, such as stablecoin issuance, be conducted in a standalone bankchartered entity, separate from any other insured depository institution subsidiary and other regulated affiliates. Additional safeguards could be considered, including enhancements to restrictions on interaffiliate transactions applicable to IDIs,” he added.