Senate Banking Committee Probes Stablecoins

On November 23, 2021, the Senate Committee on Banking, Housing, and City Affairs despatched a collection of letters to distinguished stablecoin issuers and cryptocurrency exchanges. Citing the current President’s Working Group on Monetary Markets report on stablecoins, the letters search to make clear primary operational options of assorted stablecoins which the Committee believes is important to enhancing its understanding of digital property.

The letters range barely from firm to firm, notably between issuers and exchanges, however usually search a subset of the next info:

  • Please describe the fundamental buy, trade, or minting processes by which clients can purchase your stablecoin, and different stablecoins traded in your trade, for US {dollars}. In your reply, clarify any related limitations or {qualifications} to participating in and finishing that course of.

  • Please element the method to redeem or trade your stablecoin, in addition to another stablecoins in your platform, and obtain US {dollars}. Right here, additionally, determine any necessities or limits, together with any minimal redemption dimension, ready interval, or {qualifications}.

  • Because the inception of your stablecoin, what number of tokens have been issued and what number of have been redeemed? Over the past 12 months, what’s the biggest share of your stablecoin in circulation firstly of a calendar week to be redeemed within the subsequent seven days?

  • Briefly characterize the market or operational circumstances that may stop the acquisition, trade, or redemption of your stablecoin, and another stablecoins in your platform, for US {dollars}, or for one more digital asset. For functions of answering this query, don’t checklist or describe authorized or regulatory limitations at present described in a consumer settlement or phrases of service. For every situation recognized, please present not less than one instance that occurred prior to now 12 months and its length.

  • Please determine any buying and selling platforms which have enhanced capabilities, privileges, or particular preparations with respect to your stablecoin, figuring out these options and their foundation, e.g., contractual or widespread management.

  • Please describe how clients can be impacted by a sudden loss within the liquidity of a number of stablecoins. Please additionally summarize any inner critiques or research your platform has performed into how antagonistic occasions or shocks in stablecoin markets would have an effect on the monetary place of your trade.

  • Please summarize any inner critiques or research your organization has performed about how particular ranges of redemptions or exchanges would have an effect on your stablecoin, together with its convertibility into US {dollars}, or would have an effect on the monetary place of your organization.

  • Please determine any standards you employ for evaluating between stablecoins following a forking occasion. Additionally describe a fork’s potential results on liquidity or transactions involving the ensuing stablecoins, in addition to on clients with positions in affected stablecoins. If a forking occasion has occurred in a stablecoin buying and selling in your platform inside the final 12 months, please talk about what occurred and your trade’s response.

In a press release saying the letters, Chairman Sherrod Brown (D-OH) highlighted the potential difficulties customers and traders might face in understanding how stablecoins work and their potential dangers. “I have significant concerns with the non-standardized terms applicable to redemption of particular stablecoins, how those terms differ from traditional assets, and how those terms may not be consistent across digital asset trading platforms,” Chairman Brown wrote to 1 trade. The letters request responses by December 3.

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