Regulating stablecoins like banks would absolutely have to involve reform of the OCC, whose willingness to actually issue new banking charters has slowed to a near halt in recent years.
Many fintechs would be more willing to submit to banking regulation if they felt there was a sane and cost effective path to, you know, actually becoming a bank.
> stablecoins like banks would absolutely have to involve reform of the OCC, whose willingness to actually issue new banking charters has slowed to a near halt in recent years
The article calls for regulators "to subject stablecoins to bank-like rules for transparency, liquidity and capital." Not to literally require Tether charter itself as a bank. Think money market funds or PayPal versus Wells Fargo.
There is a framework for this kind of regulation in place already, in the form of money transmitter licensing.
Coinbase, for instance, is licensed as a money transmitter in 40+ states, and relies on those licenses to do business in most of the United States, including with regards to the issuance of USDC, per my understanding. Paypal also operates in the United States under this licensing scheme.
The rigor of money transmitter regulation and licensing requirements varies state by state, but regulators' rigor overall has been increasing steadily for decades. In addition to annual and quarterly paper filing requirements, a number of states—including California, New York, and Texas, among others—perform periodic (often annual) on-site examinations of licensed companies—paid-for by licensees—wherein visiting examiners expect to have complete access to records and data.
These examinations are rigorous. After an examination, it is very unlikely that a stablecoin issuer will be allowed to continue operating as a licensed entity without being financially sound, and without fully backing its financial obligations with safe investments.
Any inability by a licensee to comply with requests made during the course of an examination, and any inability to provide acceptable answers to questions asked, can result in fines, limitations placed on the operations of the licensee, or even the loss of the license. Depending on the jurisdiction, and depending on the specific activity, operating without a license may be a crime, and would likely put a licensee out of business.
Among the requirements imposed under these licensing schemes are bonding requirements, and "permissible investment" requirements. Typically, permitted investments include bank deposits and government debt, supplemented by surety bonds issued by large insurers. In many ways, these liquidity requirements are more rigorous than those imposed on banks. Most outstanding consumer liabilities—presumably including stablecoins issued by a licensee—must be backed by these permissible investments.
Of course, given that there are 50 separate state regulatory regimes with regards to money transmission, and given stablecoins' novelty, regulation specifically pertaining to stablecoins is not standardized yet. This is a matter of education and standards setting among regulators, however. It is not a matter of requiring new legislation at the national level, or even at the state level; nor does it necessarily require major involvement by the federal bank regulators. In most US states, banking regulators already have sufficient legal authority to craft stablecoin regulations if they want to—and they have the operational capacity to enforce such regulations as well—based on their authority to license and regulate money transmitters.
> banking regulators already have sufficient legal authority to craft stablecoin regulations if they want to—and the operational capacity to enforce those regulations
Yes? The article is calling on them to use that capacity to clarify how those rules apply to stablecoins. Nobody is calling for new legislation.
I mention new legislation to underline that the specific authority to regulate non-bank stablecoin issuers already exists under state law, specifically.
And while the article doesn't call for new legislation, some people are advocating for new federal legislation to give federal regulators the authority to regulate non-bank stablecoin issuers, which is an authority that they currently do not have, generally speaking. I certainly wouldn't say that "nobody" is calling for new legislation. For example:
OP commented that the OCC would need to change its rules in order to allow more entities to obtain bank charters, and the focus of the article seemed to be on national bank regulators (without explicitly drawing a distinction). Rather than focusing at the federal level, the focus should be placed on standardizing state regulation and educating state regulators as to the powers and obligations they already have.
https://wp-vip.law.columbia.edu/wp-content/uploads/sites/2/2...
Many fintechs would be more willing to submit to banking regulation if they felt there was a sane and cost effective path to, you know, actually becoming a bank.