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The payments landscape for community banks is changing rapidly as traditional payments converge with new instant payment systems and emerging cryptocurrencies. It is critical for Community Banks to maintain awareness of developments in the payments space to assess new opportunities, mitigate risks, and ensure that their payment strategy aligns with overall business plans.
July 08, 2022
Treasury Under Secretary for Domestic Finance Nellie Liang this week explored the appropriate regulatory structure to address stablecoin risks.
Speech: In her remarks, Liang discussed two possible stablecoin regulatory models:
Bank model: Stablecoins would be backed by bank assets, capital, and liquidity buffers, though safeguards would be needed to prevent significant losses for bank and customers.
Nonbank model: Stablecoins would be backed with safe assets without a direct tie to the banking system, which could interfere with intermediation if nonbank stablecoins compete with bank deposits.
Background: The discussion of a nonbank model is a departure from last year’s stablecoin report from the President’s Working Group on Financial Markets, which advocated legislation that would require stablecoin issuers to be insured depository institutions.
More: ICBA recently published a series of blog posts on the collapse of the TerraUSD stablecoin, its ongoing impact on financial markets, and how it affects community banks and the regulatory debate.