Despite the “novel and complex” risks of cryptoassets, there could be benefits in payment stablecoin, especially if it fosters an “inclusive, real–time payment system,” Acting FDIC Chairman Martin Gruenberg said today during an industry event exploring the regulation of cryptoassets. “It is important to have this debate, not only in the context of regulating crypto–related risks, but in the context of the future of banking—especially community banking,” he said.
Any such payment system should be designed to “complement” the Federal Reserve’s soon-to-be-released FedNow system, Gruenberg said, noting that payment stablecoins could be safer than the stablecoins currently in the marketplace if: subject to prudential regulation; required to be backed dollar–for–dollar by high–quality, short–dated U.S. Treasury assets; and transacted on permissioned ledger systems with a “robust” governance and compliance mechanisms.
The development of a payment stablecoin could fundamentally alter the landscape of banking, Gruenberg noted. “Economies of scale associated with payment stablecoins could lead to further consolidation in the banking system or disintermediation of traditional banks, and the network effects associated with payment stablecoins could alter the manner in which credit is extended within the banking system—for example by facilitating greater use of fintech and nonbank lending—and possibly leading to forms of credit disintermediation that could harm the viability of many U.S. banks and potentially create a foundation for a new type of shadow banking.”
Payment stablecoins could exhibit many of the features and potential vulnerabilities associated with money market mutual funds, he cautioned. Disclosure and consumer protection issues sound be “carefully” considered, especially if custodial wallets are allowed outside of the banking system as a means for holding and conducting transactions. “A payment stablecoin and any associated hosted or custodial wallets should be designed in a manner that eliminates—not creates—barriers for low– and moderate–income households to benefit from a real–time payment system,” he said. “Additional studies should be undertaken to see if there are design features that could provide incentives for greater participation by unbanked and under–banked households. At the same time, it also raises the questions about those lacking appropriate technological resources, including internet connectivity, and risks of financial exclusion if the financial system moves primarily to a digital format.”