Florida Banking September 2023

If President Reagan were here today, he would oppose many of these bills being filed by today’s Republicans that cause more regulatory burdens and cost.

states, what Chairman McHenry is really saying is that he is opposed to, or wants very limited, regulation for the stablecoin industry. Most states fund other priorities before funding an industry they know little to nothing about. Like the Cramer bill, McHenry’s proposed legislation will put consumers at risk, disadvantage banks, undermine financial stability and create an unlevel playing field with other financial institutions (including FDIC banks). Stablecoins, which have grown in aggregate value from about $12B in July 2020 to $127B today, are a form of digital currency that seek to maintain a one-to one peg with a reference asset often by holding reserves as collateral. Stablecoins are unique among digital assets in that they mimic commercial bank money with potential use as a means of payment and as a deposit substitute restricting credit availability. Importantly, stablecoin issuance is, in effect, a monetary exercise comparable to the business operations of regulated banks. Even today, very few people fully understand this industry and yet Chairman McHenry wants to place this regulatory task on the backs of states that have limited resources. This is a nonstarter. To ensure effective consumer protection and financial stability, it is critical that the stablecoin industry, like the banking industry, be subject to strong regulatory oversight, starting with the federal government. A key pillar of the proposed legislation is a role for state banking regulators to approve and supervise

stablecoin issuers. While some have advocated for this role for state regulators by comparing it to the dual-banking system, the proposed state path for payment stablecoin issuers is not comparable to that of state-chartered banks. State chartered banks are also regulated by a federal banking regulator. Rather, the proposed oversight model is more like state-based money transmitter licenses, a model that is insufficient to mitigate the risks to financial stability and consumer protection posed by stablecoins. Congress should apply the same level of Federal oversight to state-licensed stablecoin issuers as is currently applied to state-chartered banks in order to limit the risk of charter arbitrage. Federal oversight applied in this equivalent manner — reflecting the principle of same activity, same risk, same regulation — would include state-licensed stablecoin issuers having a primary federal regulator that evaluates and approves or rejects license applications, establishes and enforces compliance with rules to ensure financial stability and consumer protection, and participates in ongoing supervision. Yes, we are living in different political days, but the FBA will be there to advocate and lobby for more sensible legislation. In July, the FBA and a group of Florida bankers, led by our Chairman Jose Cueto and Chair-Elect Derek Jones, walked the hallways of Congress to push for more reasonable and sensible legislation — and we will not stop!

WWW.FLORIDABANKERS.COM SEPTEMBER 2023 — 7