Senate Banking Committee Seeking Additional Info on Stablecoins

The U.S. Senate Banking Committee has requested further information on stablecoins and how companies that issue them are protecting consumers.

Senator Sherrod Brown penned a letter to the industry’s leading stablecoin issuers seeking further information on Nov. 23.

The letter was sent to the chief executives of Tether and Circle. A copy was also delivered to Coinbase, Centre, Gemini, Paxos, TrustToken, and Binance.US according to the Senator’s official website.  

It stated that a recent President’s Working Group on Financial Markets report highlighted that “stablecoins present investor protection risks and raise several market integrity concerns.”

Brown, the Chair of the Senate Committee on Banking, Housing, and Urban Affairs, said that “complex terms and conditions” applicable to crypto-assets and stablecoins can make it difficult for investors and consumers to fully understand how they function and their potential risks.

I have significant concerns with the non-standardized terms applicable to redemption of particular stablecoins, how those terms differ from traditional assets, and how those terms may not be consistent across digital asset trading platforms.

Seeking answers

Brown set a response date of Dec 3 and asked for clear and straightforward terms regarding “basic purchase, exchange, or minting processes” by which customers can acquire stablecoins for USD.

He also sought information on redeeming processes, issuance, “enhanced capabilities” on trading platforms, and market or operational conditions that would prevent the purchase or redemption of the asset.

On Nov 24, co-founder and CEO of Circle, Jeremy Allaire, thanked the Senator for the inquiry and spoke of further cooperation with regulators:

Thank you @SenSherrodBrown for the letter inquiring about the important topic of how stablecoin issuers protect consumers. I look forward to responding and working with you to ensure consumers are appropriately protected.

Staff writer for The New Republic Jacob Silverman commented, “Senator Sherrod Brown’s questions are addressed to #Tether CEO Jean Louis van der Velde, who hasn’t been seen or heard from in years.”

Stablecoins in the sights of regulators

Sherrod Brown is among the Senators that have been very vocal against Facebook’s plans to launch its own cryptocurrency and wallet called Diem and Novi.

In September, BeInCrypto reported that the U.S. Treasury had expressed concerns over stablecoins, Tether in particular. The Financial Stability Oversight Council was preparing a formal review into whether stablecoins pose an economic threat, but the wheels of regulation turn at a slow pace in the United States.