The Federal Reserve Board (the “FRB”) issued Supervision and Regulation Letter 22-6 (“SR 22-6”), providing guidance for FRB-supervised banking organizations (referred to collectively herein as “FRB banks”) seeking to engage in activities related to cryptocurrency and other digital assets. The letter states that prior to engaging in crypto-asset-related activities, such FRB banks must ensure that their activities are “legally permissible” and determine whether any regulatory filings are required. SR 22-6 further states that FRB banks should notify the FRB prior to engaging in crypto-asset-related activities. Any FRB bank that is already engaged in crypto-asset-related activities should notify the FRB promptly regarding the engagement in such activities, if it has not already done so. The FRB also encourages state member banks to contact state regulators before engaging in any crypto-asset-related activity.Read More
On June 8, 2022, the New York State Department of Financial Services (“NYDFS”) released regulatory guidance applicable only to payment stablecoins that are backed by the U.S. Dollar and issued by entities regulated by NYDFS. The guidance comes one day after Senators Kirsten Gillibrand (D-N.Y.) and Cynthia Lummis (R-Wyo.) released a bill calling for dramatic changes to federal regulation of the cryptocurrency industry (see our quick analysis here) and less than a week after New York’s legislature passed two bills aimed at crypto regulation. Focusing on three criteria—redeemability, reserves, and attestation—the NYDFS stablecoin guidance is intended to ensure that payment stablecoin issuers remain solvent so holders of those payment stablecoins can timely exercise their right to redeem. This guidance does not address a stablecoin’s trading price and does not mandate that the issuer take any active measures to ensure the price of the asset on markets.Read More
The “Lummis-Gillibrand Responsible Financial Innovation Act,” announced this morning, lays out a bold agenda for legal reform across multiple regulatory regimes aimed at clarifying legal requirements for regulated entities to issue, trade, and provide services related to certain digital assets. Although a point by point summary of the 69 page bill is beyond the scope of this post, here’s a brief summary of 10 impactful provisions from the Bill:Read More
On 1 November 2021, the President’s Working Group on Financial Markets (PWG), in conjunction with the Federal Deposit Insurance Corporation and the Comptroller of the Currency, issued a long-awaited joint “Report on Stablecoins” (Report). Per the press release (and a speech by Undersecretary of Treasury Nellie Liang), the Report is intended to “identify regulatory gaps related to “payment stablecoins” (defined as stablecoins that are designed to maintain a stable value and “therefore have potential to be used as widespread means of payment”), and to present recommendations for addressing those gaps.”Read More
On 7 January, the UK Treasury published a consultation on its proposed approach to regulating stablecoins. https://www.gov.uk/government/consultations/uk-regulatory-approach-to-cryptoassets-and-stablecoins-consultation-and-call-for-evidence Although the title of the consultation includes “cryptoassets” – this is the just first stage in the consultative process for cryptoassets, which focuses on stablecoins referred to as “stable tokens”. The consultation closes on 21 March. For US readers, a “consultation” is the start of regulatory process, not unlike an “Advance Notice of Proposed Rulemaking” or “ANPR” in the US. The UK government sets out the supervisory perimeters, seeking input from the public, and leaving the detailed requirements to be designed by the regulators. Accordingly, the consultation discusses only general principles and the overall framework.Read More
Stablecoins have attracted much regulatory attention lately. The G7 working group on stablecoins, the International Organization of Securities Commissions, the Financial Stability Board (FSB) and the European Commission are among the international institutions pressing for global stablecoins regulation. The overarching regulatory problems they all identify are:Read More
The office of the Comptroller of the Currency (OCC) issued an Advance Notice of Proposed Rulemaking (ANPR) on June 3, 2020, focusing on digital banking activities. Typically such ANPRs are a precursor to new federal regulation; following collection of data from the industry and other interested parties, the OCC may propose new regulations by issuing a Notice of Proposed Rulemaking within 6-12 months. Responses to the ANPR are due on August 3, 2020.Read More
On January 2, the Texas Department of Banking (“DoB”) updated Supervisory Memorandum – 1037 (“Guidance”) which provides guidance regarding the application of the Texas Money Services Act (the “Act”) to virtual currencies. First issued on April 3, 2014, the Guidance divides virtual currency into two categories: centralized and decentralized.
Centralized virtual currencies are virtual currencies “created and issued by a specified source” that “rely on an entity with some form of authority or control over the currency”. Decentralized virtual currencies, on the other hand, are virtual currencies that do not have an administrator or a central repository.
Stablecoins are considered decentralized virtual currencies, provided they do not have an administrator or central repository. According to the Guidance, whether the Act applies to centralized virtual currencies requires a case-by-case determination. As for decentralized virtual currencies, the Guidance states that the Act only applies when sovereign currency is involved, and only in certain cases, because decentralized virtual currencies do not constitute money or monetary value.Read more