FDIC Head Calls to Limit Stablecoins to Permissioned Blockchains

https://www.theblock.co/post/178655/fdic-head-calls-to-limit-stablecoins-to-permissioned-blockchains

The acting head of the Federal Deposit Insurance Corporation, a U.S. bank regulator, is calling for more restrictions on stablecoin issuance. Most notably, the bank regulator is suggesting limiting stablecoins to permissioned blockchains.

“Payment stablecoins would be safer if they were transacted on permissioned ledger systems with a robust governance and compliance mechanisms," said FDIC Acting Chair Martin Gruenberg, in remarks prepared for a speech at the Brookings Institution, Washington-based thinktank, this morning. “The ability to know all the parties – including nodes and validators – that are engaging in payment stablecoin activities is critical to ensuring compliance with anti-money laundering and countering the financing of terrorism regulations, and deterring sanction evasion,” he continued, adding that, “innovation can be a double-edged sword.” 

The idea that validators and nodes would themselves be subject to know-your-customer provisions could receive strong pushback from various companies and projects in the digital asset industry.

Senior U.S. regulators have also highlighted that stablecoins resemble money market funds — which are securities investments — a sentiment that Gruenberg echoed. 

The acting FDIC chair also cautioned about statements misleading users about “the availability of federal deposit insurance for a given crypto-asset product violate the law,” an issue that the FDIC has brought up with some of the biggest names in the industry.

"We will continue to work with our supervised banks to ensure that any crypto-asset-related activities that they engage in are permissible banking activities that can be conducted in a safe and sound manner and in compliance with existing laws and regulations," added Gruenberg.