Blockchain startup Figure Technologies Inc. and other firms have held talks with US regulators on how to issue a stablecoin that satisfies watchdogs amid deep skepticism from Washington about the fast-growing sector of the cryptocurrency market.
Senior officials from the Federal Reserve, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation met last week with Figure and its partners in an emerging crypto effort known as the USDF Consortium, according to people familiar with the meetings they requested. anonymity because the discussions were private. Spokespersons for the agencies declined to comment.
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The meeting with regulators comes after the President’s Working Group on Financial Markets recommended earlier this month that issuers of stablecoins become insured depository institutions subject to the same supervision and regulation as banks. The USDF effort is one of the first to start advocating for stablecoins that companies hope will satisfy unwritten rules, and others are expected to follow as agencies try to catch up with an already approaching crypto market. at $ 3 trillion.
“As stablecoin policy evolves, we believe the USDF Consortium is well positioned to deliver and continue to grow,” said Ashley Harris, Figure General Counsel, in a statement. The group’s approach is “consistent with the recommendations of the President’s Task Force that stablecoin be minted exclusively by insured depository institutions.”
The consortium’s new currency, USDForward, differs from widely used stablecoins like Tether and USDC in that it would be issued by banks and backed by dollar deposits in a system that banking regulators already oversee.
While stablecoins like Tether are backed by reserves intended to ensure that each token can be exchanged for one US dollar, critics argue that those reserves are opaque and unregulated. Bank-issued digital tokens, such as JPMorgan Chase & Co.’s JPM Coin, are backed by dollars actually owned by the lender.
In the case of USDF, New York Community Bancorp Inc. and other partner banks will accept deposits from customers who want to use the tokens. Banks will mint digital markers linked to those deposits, and customers can implement the markers to pay for transactions, which will be recorded on the publicly sourced blockchain.
Figura, a blockchain lending startup, is managing the plumbing behind the consortium. The effort is also supported by JAM FINTOP, a partnership of JAM Special Opportunity Ventures, an affiliate of financial services investor Jacobs Asset Management, and fintech firm Fintop Capital.
The three banking agencies and market regulators, the SEC and the Commodity Futures Trading Commission, are still in the early days of determining what to do with cryptocurrencies. A group of agency heads known as the Financial Stability Oversight Board is weighing whether to view stablecoins as a sufficient threat to the broader financial system to warrant intervention.
© 2021 Bloomberg