Banking Groups Urge Regulators to Consider Stablecoin Risks

A network of banking associations has called on federal regulators to consider the potential risks posed by payment stablecoin issuers.

In a joint letter, the American Bankers Association, the Bank Policy Institute, the Consumer Bankers Association and the Independent Community Bankers of America outlined recommendations for federal regulators to include in their annual report to Congress on stablecoins.

“We are deeply concerned about the potential risks that payment stablecoin issuers and their activities pose to the larger financial system,” the group stated in the letter. “The primary Federal payment stablecoin regulators should use the analysis undertaken to produce the annual report to inform potential amendments to their respective regulations governing payment stablecoin issuers and the overall ecosystem.”

The group identified a number of concerns, including the vulnerability of payment stablecoin issuers to runs and the contagion risk from the rapid redemption of payment stablecoins both within and outside the stablecoin industry, as key risks to the wider financial market.

The letter also cited the impact of yield-like arrangements on stablecoin growth, the reduction in credit availability associated with that growth, wider risks from stablecoin lending and the risks arising from the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act’s multi-regulator framework.

The group noted that the Act created opportunities for regulatory arbitrage that, left unaddressed, could concentrate risk in less-supervised corners of the payment stablecoin market and undermine financial system safety and soundness.

The letter was addressed to Jonathan Gould, Comptroller of the Currency, Michelle Bowman, vice chair for supervision of the US Federal Reserve, Congressman French Hill, Chairman of the new subcommittee tasked with overseeing all areas related to digital assets and financial technology, and Kyle Hauptman, Chairman of the National Credit Union Administration (NCUA).

Under the GENIUS Act, regulators must submit an annual report on the payment stablecoin industry.