In the wake of the collapse of crypto exchange platform FTX, the Progressive Policy Institute (PPI) today sent a letter to leadership of the House Committee on Financial Services and the Senate Committee on Banking, Housing and Urban Affairs calling for a functional and modern regulatory regime for digital assets.
Efforts to provide clarity to the regulatory framework of stablecoins have advanced in the House Committee on Financial Services, albeit slowly. The crash of FTX is yet another example of customers losing their savings due to the failure of unregulated institutions, highlighting the need for quick action from federal policymakers on digital assets. PPI urges the leadership of the House Financial Services and Senate Banking Committees to come together in a bipartisan way and advance regulation that balances both the benefits and risks of digital assets for investors and future consumers.
Download and read the full letter here:
November 17, 2022
The Honorable Maxine Waters
Chair
U.S. House Committee on Financial Services
Washington, DC 20515
The Honorable Patrick McHenry
Ranking Member
U.S. House Committee on Financial Services
Washington, DC 20515
The Honorable Sherrod Brown
Chair
U.S. Senate Committee on Banking, Housing and Urban Affairs
Washington, DC 20515
The Honorable Pat Toomey
Ranking Member
U.S. Senate Committee on Banking, Housing and Urban Affairs
Washington, DC 20515
Dear Chair Waters, Ranking Member McHenry, Chair Brown, and Ranking Member Toomey:
The collapse of crypto exchange platform FTX underscores the need for a modern, clear, and well functioning regulatory regime for digital assets. In a moment where uncertainty for cryptocurrency investors is rising — with customers losing their savings in the failures of unregulated institutions — the need for legislation to protect investors in the market for digital assets has never been more clear. But protecting investors while enabling the innovation that drives progress will require a balanced approach.
Stablecoins can mitigate the risk of volatility associated with other cryptocurrencies and capitalize on the benefits of digital assets, such as allowing for faster and more efficient transmission of money. However, without a regulatory definition of ‘stablecoins,’ other tokens call themselves stablecoins and are listed as such but are not truly stable, hurting consumers who invest in them. The industry has seen so-called-stablecoins lose value almost overnight, as evidenced by the collapse of TerraUSD in May 2022.
Bipartisan legislative efforts by House Financial Services Committee Chair Maxine Waters and Ranking Member Patrick McHenry have sought to address the need for regulatory clarity in the realm of stablecoins. These efforts can be an important building block in the effort to provide sensible protections for investors.
In the wake of the failure of FTX, regulation may need to be expanded to a broader scope. Fundamentally, though, regulation must both ensure stability and liquidity, and put appropriate measures in place to protect consumers when that is not the case. In regard to stablecoin regulation, a first step is defining a stablecoin as something backed by dollars, allowing consumers to determine legitimate value of digital assets in the market. Additional measures could include enforceable reserve requirements for stablecoins, transparency, and disclosure requirements for the assets backing those stablecoins, compliance with anti-money laundering/counter-terrorism financing rules, and clear rules regarding the timely redemption of payment from the sale of stablecoins.
Innovative payment systems like stablecoins bring competition to the banking and money transmission industries and can provide less expensive, more efficient payments. But legislation is needed to make this system more sustainable. It is crucial that Congress move forward to regulate digital assets, including stablecoins, in a way that balances their benefits and risks.
Sincerely,
Progressive Policy Institute
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The Progressive Policy Institute (PPI) is a catalyst for policy innovation and political reform based in Washington, D.C. Its mission is to create radically pragmatic ideas for moving America beyond ideological and partisan deadlock. Learn more about PPI by visiting progressivepolicy.org.
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Media Contact: Aaron White; awhite@ppionline.org
