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Senator Sherrod Brown (D-O.H.), Chair of the Senate Banking Committee, has sent inquiry letters to major stablecoin issuers and exchanges as the Committee seeks more information on the topic in the lead up to a likely hearing next year.
In a letter to Circle CEO Jeremy Allaire, posted online, Sen. Brown expressed concern about the lack of transparency around stablecoins and questions the consistency of the redemption process.
Today Senate Banking Committee sent letters to stablecoin issuers Coinbase, Gemini, Circle, Paxos, TrustToken, Centre, and Binance US about general business practices and safeguards. Turn around time: Dec 3rd. This is likely a sign of an upcoming hearing.https://t.co/kW8deImm6x
— Ron Hammond (@RonwHammond) November 23, 2021
“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,” the Sen. Brown wrote to Circle, the payments company behind USDC. “Because the term stablecoin is used broadly, users may not appreciate the complexity and distinct features and terms of each stablecoin.”
Brown wrote that he would like a response by December 3, and requested that his questions be answered in “clear, straightforward terms.”
Earlier this year, the President’s Working Group on Financial Markets issued a report that urged stablecoin issuance be limited to banks, citing market integrity concerns.
For its part, Circle’s Jeremy Allaire tweeted his support for further government oversight and regulation of the market, writing that he looks forward to “responding and working with you to ensure consumers are appropriately protected.”
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. https://t.co/RWWmI0erOA
— Jeremy Allaire (@jerallaire) November 24, 2021
Brown also penned a letter to Tether, the largest stablecoin issuer, asking similar questions. In February, Tether’s parent Bitfinex settled with the New York Attorney General over irregularities in reporting the reserves it is backed by. In addition, Tether is currently being probed by the Department of Justice over allegations of bank fraud.
Banks and crypto on the same side?
As digital assets become more of a mainstream asset class, regulatory scrutiny around them is increasing. President Biden’s pick for the head of Office of the Comptroller of the Currency, Saule Omarova, a professor at Cornell University Law School, said that she wants to “end banking as we know it” but at the same time increase the regulatory intensity around crypto and stablecoins. She has also cited the “crypto revolution” as “benefiting mainly the dysfunctional financial system we already have.”
Omarova’s candidacy therefore marks a rare time when lobbying interests in D.C. supporting banks are against her nomination, making them natural allies to the digital asset industry.
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