(Dec. 23, 2021) Regulators should take appropriate actions within their jurisdictions to address risks associated with digital assets like stablecoins, while continuing to coordinate and collaborate on issues of common interest, the Financial Stability Oversight Council (FSOC) recommended late last week.
And if federal legislation mandating regulation of stablecoins and other digital assets is not enacted, FSOC said, regulators should be ready to take steps on their own.
In its 2021 annual report, the Financial Stability Oversight Council (FSOC) made several recommendations, including those on digital assets, transition away from the LIBOR reference rate, climate-related financial risk, and cybersecurity.
“The Financial Stability Oversight Council’s annual report analyzes past episodes of financial turmoil to understand weak points in our financial system. It also reviews the actions taken by the Council to strengthen our financial system, with one eye on the past and one on the future,” said Secretary of the Treasury Janet L. Yellen, who chairs the council made up of leaders of federal financial regulators. “In the coming year, the Council will continue to monitor threats to financial stability and take concrete action where appropriate.”
Regarding digital assets, the report recommends that member agencies consider the November-released report on stablecoins issued by the President’s Working Group on Financial Markets, in conjunction with the FDIC and the OCC.
Among other things, that report advocated requiring that stablecoins should only be issued through federally insured depository institutions (such as credit unions and banks) through an act of Congress. The report also recommended that that legislation complement existing authorities held by federal regulators meant to ensure market integrity, investor protection, and prevention of illicit finance.
“The Council recommends that federal and state regulators continue to examine risks to the financial system posed by new and emerging uses of digital assets and coordinate to address potential issues that arise from digital assets,” the report stated. It added that the FSOC will further assess and monitor the potential risks of stablecoins while recommending FSOC members consider actions to address those stablecoin risks by working together.
However, if legislation is not enacted, the FSOC said, it will be ready. “The Council will also be prepared to consider steps available to it to address risks outlined in the PWG Report in the event comprehensive legislation is not enacted,” the report states.