FDIC Chair Jelena McWilliams warned that, unless appropriate regulation is provided allowing for banks' engagement with new product developments such as blockchain technologies, these products will inevitably move outside of the traditional banking system.
At the Money 20/20 global fintech conference, Ms. McWilliams stated that the FDIC will issue policy statements on banks' digital asset activity in the coming months. She emphasized that in developing a regulatory framework for digital assets, (i) regulators should establish "clear regulatory expectations" and (ii) "regulators should have the authority to ensure" that issuers have sufficient reserves "available on demand to satisfy withdrawal requests."
Ms. McWilliams praised stablecoins as an alternative mechanism for retail payments, highlighting their "programmable" features that could facilitate automatic payments being made on the "occurrence of a specified event." She acknowledged certain risks associated with stablecoins, including operational resilience and money laundering risks, as well as the fact that a stablecoin "run" could lead to financial instability. To optimize transactional efficiency, and at the same time minimize risks, Ms. McWilliams concluded that it is necessary that stablecoins be subject to "well-tailored government oversight" based, in part, on the "foundation that stablecoins issued from outside the banking sector are truly backed 1:1 by safe, highly liquid assets."
Commentary
FDIC Chair Jelena McWilliams' remarks on digital assets are notable. They are, perhaps, the most favorable statements on stablecoins issued by a member of the Biden administration.
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