Is stablecoin in your future?

Editor’s Note: This column was included in the May 8 Pulse sent to subscribers by BankBeat. If the Senate’s GENIUS Act, and its companion bill in the House, the STABLE Act, pass in the coming weeks or months, you may find yourself managing stablecoins sooner than you think. The legislation would establish a federal framework for licensing and regulating stablecoins and their issuers. . A stablecoin is a digital currency, pegged to an established currency designed to give it a stable price. The GENIUS Act defines stablecoin as a means of payment or settlement backed one-to-one with U.S. dollars (or equivalents such as Treasury bills), segregated from other funds. The legislation identifies stablecoin issuers as subsidiaries of insured depository institutions, or other qualified nonbank entities regulated by the Office of the Comptroller of the Currency. The bills also allow for state-qualified nonbank stablecoin issuers, as long as they have a market capitalization of under $10 billion. The Fed, OCC and FDIC would be allowed in some cases to take enforcement actions against stablecoin issuers, even those subject to the supervision of state banking agencies. While the bills have bipartisan support, they are vexing some regulators because they are an affront to the dual banking system. Keep in mind that up to this point, most stablecoin regulation has been established on the state level. Federal preemption of state crypto laws likely would make it more difficult for community banks to participate in the stablecoin arena. Whenever the idea of federal preemption comes up in banking, community-minded folks in the center of the country seem to get squeezed; we are a big country where one-size-fits-all regulations simply do not work. And, I would contend that the value of the dual banking system holds up regardless of whether the currency is digital, fiat or backed by gold. Bankers and their advocates are encouraged to keep an eye on the GENIUS and STABLE Acts, keeping in mind that community banks have always played an important role in the economy and will continue to do so as the digital economy matures.