United States of America: President’s working group on financial markets released the report on stablecoins including legislative recommendations

On 1 November 2021, the United States (US) President of the Working Group on Financial Markets (PWG) alongside two other government agencies, the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) published the report on stablecoins, outlining the risks identified and recommendation for new federal legislation. Stablecoins are defined as digital assets designed to have a stable value in relation to the US dollar and the agencies emphasized that even though they are mostly used in the trading of other digital assets, in the future these instruments could be used as means of payment by businesses and households. The report finds that the increasing use of stablecoins has the potential of “destabilizing runs”, “disrupting the payment system” and “concentration of economic power”. In order to address the issues raised in the report, the agencies recommend US Congress pass legislation that protects stablecoins users and implements new requirements to avoid consecutive price increases or decreases. Furthermore, it notes the need for federal supervision that has the authority to require and ensure that a stablecoin issuer meets risk-management standards. Finally, the regulators stress the importance of addressing the “concentration of economic power” by limiting the affiliation with commercial entities and the usage of users’ transaction data.