Former FDIC Chair Jelena McWilliams says bank-issued stablecoins resemble traditional bank deposits, adding further weight to proposals limiting the issuance of stablecoins to insured depository institutions.
Addressing the Bipartisan Policy Center on Feb. 3 during her final day as chair, McWilliams urged the FDIC to provide clarity soon, including possibly amending deposit insurance rules. McWilliams’ comments came after she directed agency staff last year to study whether stablecoins can or should be insured by the government.
Last November, the President’s Working Group on Financial Markets, the FDIC, and the Office of the Comptroller of the Currency released a report calling for immediate legislative action to limit the issuance of stablecoins to insured depository institutions and to allow for prudential regulation of stablecoins to respond to broader financial system risks.
Amid safety concerns, stablecoins — a cryptocurrency intended to have a relatively stable price through being pegged to a commodity, currency or by having its supply regulated by an algorithm — continue to gain market share. The Fitch ratings agency estimated that stablecoin assets increased by approximately 450 percent to $156 billion in 2021. Just last month, a group of regional banks launched a consortium to spur the development of the bank-minted stablecoin USDF to compete with non-bank-issued stablecoins and meet rising consumer demand.Though admitting that security risks remain, McWilliams called the development of stablecoins part of “a revolutionary time we are in.”
“This is as big as the invention of the internet, as we look at how are financial services going to be offered, what will the banking of the future look like, how we are going to be exchanging payments, what is going to be money of the future,” she said. “I think there is an opportunity here for us to be careful but at the same time not be so careful that we stifle innovation.”
McWilliams resigned Feb. 4 after allegations were made that prominent, Democratic FDIC board members were attempting to take control of the agency. That eases the path for Democrats to gain control of the FDIC, which could lead to tougher requirements around bank mergers, climate change and other efforts. McWilliams, who immigrated to the United States from Yugoslavia as an 18-year-old in 1991, has led the FDIC since being appointed in 2018 by former President Donald Trump.