Digital Chamber of Commerce promotes stable currency supervision: promote innovation, abandon misleading, and reasonable supervision

Stablecoins, led by Tether, have recently received more and more regulatory scrutiny. Earlier this month, Tether and its affiliated crypto exchange Bitfinex agreed to pay $42.5 million to settle allegations made by the US Commodity Futures Trading Commission (CFTC) for allegedly making misleading statements and illegal transactions.

According to reports by Bloomberg citing anonymous sources, the US Securities and Exchange Commission (SEC) is about to play a leading role in proposing legislation and overseeing the stablecoin industry, while its sister institution, the Commodity Futures Trading Commission (CFTC), will play a supervisory role. According to sources, the US Treasury Department and other agencies are expected to release a report this week and will also urge Congress to pass legislation to determine that the regulation of stablecoins should be similar to bank deposits. The report was prepared by the President’s Financial Markets Working Group, which is composed of key representatives of the country’s major regulatory agencies, including Treasury Secretary Janet L. Yellen, Federal Reserve Chairman Jerome Powell, and SEC Chairman Gary Gensler And CFTC Chairman Rostin Benham.

“Stable coins should not be used as securities”

Regulators have been considering applying new rules to regulate stablecoins similar to managing money market funds, as well as new banking rules. While the entire encryption industry is waiting for the US government to supervise stablecoins, the American Digital Chamber of Commerce has sent a 17-page letter to the US Treasury, the Federal Reserve and the SEC in an attempt to lobby various institutions that stablecoins should not be used as Securities or money market funds are regulated because they use blockchain technology to settle transactions instantly.

The Digital Chamber of Commerce is “the world’s leading trade association on behalf of the digital asset and blockchain industry”, and its mission is to “promote the acceptance and use of digital assets and blockchain-based technologies”, and it is also one of the largest lobbying groups in the crypto industry. Organization members include: Microsoft, JP Morgan, MasterCard, Fidelity Investments, Messari, Ouke Cloud Chain and other global business and technology giants.

According to the Digital Chamber of Commerce’s statement in the letter, stablecoins should be regulated as a payment system, and the current monitoring system should be standardized by using the “Money Transmission Law” applicable in each state.

Perianne Boring, founder and president of the Digital Chamber of Commerce, believes: “Stablecoins are an important part of the crypto ecosystem and are essential for any new policies or regulations that allow the technology to develop in a sustainable manner.”

“It’s really important that we do this well. If we get policy advice that doesn’t allow stablecoins to operate as a payment system tool, it will be pushed overseas,” she added.

The letter quoted the opinion of the U.S. Supreme Court that for investment products to meet the definition of securities, they must have profit expectations. In this case, they believe that stablecoins are not designed to increase value, nor will they bring profit expectations.

Perianne believes: “If stablecoins are classified as securities, it will restrict their use as retail payments.”

“Stable coins have advantages”

In the letter, the Digital Chamber of Commerce explained to regulators some of the advantages of stablecoins, as well as recommendations for supervision.

Innovative uses of stablecoins are expected to change today’s payment systems

“Stablecoins provide a lower cost and faster payment method that solves some of the most pressing problems inherent in the current payment system. Although the benefits of faster, cheaper and more reliable payments will lead to many Innovations in the economic sector, but these benefits may have the greatest impact on those at the lowest level of the economic ladder. The stablecoin payment system is innovating around how we send and receive payments, similar to how the Internet disrupts information sharing methods.”

Blockchain technology is changing the global financial system to create a more technologically advanced and inclusive financial future, and stablecoins are a tool to promote this change. By adopting a principle-based, flexible and tailor-made regulatory system for the minimum risks that stablecoins bring to the financial system, regulators have a unique opportunity to establish the United States as a leader in stablecoin innovation. 

To this end, we recommend retaining the existing federal and state-level regulatory systems, allowing stablecoin payment systems to be regulated in the same way as other retail-focused digital payment businesses.

U.S.-based stablecoins are extensively regulated at the state and federal levels

The US-based stablecoin payment system pegged to the US dollar is widely regulated. As described below, the applicable regulatory framework may involve federal-level fund transfer laws and state-level trust company charters, as well as federal-level FinCEN, CFPB, and CFTC regulations. Before attempting to develop a new regulatory system, policymakers should first determine what gaps exist through a transparent and open process. We believe that for the US-based stablecoin payment system that is linked to the US dollar, there is no major gap in the existing regulatory system, but there are opportunities to streamline and improve regulatory methods.

The US dollar-pegged stablecoin payment system that focuses on the US market but does not have a US headquarters is usually also subject to US regulations. In our view, an important way for the United States to deal with the growth of stable currency payment systems based mainly outside the United States is to ensure that the regulatory environment in the United States allows stable currency payment systems based in the United States, with transparent structures and linked to the US dollar, to be safe and effective. prosper. In addition, international cooperation is essential to reduce financial risks and prevent regulatory arbitrage. The United States should continue to work through the Financial Stability Board and other international standard-setting agencies, and where possible, maintain consistency and coordination with other major market jurisdictions to ensure regulatory coordination that reduces risks while allowing innovation to occur.

Principles for any future regulatory actions

The Digital Chamber of Commerce believes that the following principles should guide regulatory agencies’ decisions on stablecoin policies:

a) Technology neutral

b) Supervise in proportion to risk

c) Ensure the U.S.’s global leadership in the blockchain field

d) Treat stablecoins as a type of digital payment tool, not an investment product

e) Ensure compliance with anti-money laundering and counter-terrorism financing requirements

f) Develop flexible, principle-based rules

Opportunities to simplify and strengthen regulation of stablecoins

Regulators should not establish a new federal regulatory system for stablecoins, but should consider strengthening the current system, which involves time-tested state and federal frameworks. At the same time, for companies that wish to obtain national legal certainty, a federal-level option should be provided. The certainty comes from the federal-level special purpose charter of the national banking supervisory agency.

Regulators should “abandon misleading”

Gary Gensler, chairman of the US Securities and Exchange Commission, has repeatedly compared stablecoins with “casino poker chips”. At this week’s market summit, the crypto industry is like the “Wild West” and called on regulators to give it to Institutions have more supervisory powers for them.

In this regard, the Digital Chamber of Commerce believes: “Our view that stablecoins will bring systemic risks is seriously misleading.”

The Chamber of Commerce recommends that the US government provide the option of obtaining a National Bank license, but it should not be mandatory. Some crypto experts also oppose the regulation of stablecoins as money market funds, believing that their assets are not like money market funds, which are used as passive investments. Most stablecoins are not designed to increase value, but are used for digital payments.

In view of the rapid growth of the stablecoin market, regulators are increasingly aware of systemic risks. The current total market value of stablecoins exceeds 130 billion U.S. dollars, which is higher than the 37 billion U.S. dollars in early 2021. Some of the more popular stablecoins are Tether, BinanceCoin, and Paxos.

The Digital Chamber of Commerce stated in the letter: “We believe that stable currency regulation should be adjusted according to the different risk conditions of different types of stable currency payment systems. Therefore, federal regulatory agencies will only be able to adopt stable currency payment systems across the country on a large scale. Consider additional safeguards.”

The Chamber of Commerce believes that the scale of most stablecoin payment systems is similar to that of corporate rewards programs, such as airline miles or Starbucks gift cards. “Our view that stablecoins bring systemic risks is seriously misguided.”

“There is almost no risk”

However, the government is concerned that stablecoins will not operate stably. Issuers hold large amounts of commercial paper or other short-term securities, such as U.S. Treasury bonds or certificates of deposit. If the cryptocurrency plummets, investors may choose to withdraw funds suddenly, causing investors to suffer losses, or worse, the financial system may suffer There was a run.

Perianne said: “I can’t use any evidence to show that [stablecoin] is even systemic.”

The Digital Chamber of Commerce is more concerned about stablecoin issuers like Circle, but not Tether. The Digital Chamber of Commerce pointed out that the reserves of American stablecoin issuers such as Circle are almost entirely held in cash, rather than holding large amounts of commercial paper like Tether. Unlike banks, US-based stablecoin issuers have no leverage and hardly pose systemic risks.

Currently, the Digital Chamber of Commerce believes that no stablecoin issuer in the United States has reached the scale that requires additional supervision.

“If the issuer’s disclosure is correct, I don’t think there will be a run in this situation,” she said. “Nothing can convince us that investors will be threatened.”

Posted by:CoinYuppie,Reprinted with attribution to:
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