The United States must do more to nurture a fast, safe, and competitive payments system. New technologies can help to advance this goal, which would yield enormous benefits for consumers, workers, and small businesses.
Today’s report examines stablecoins. Stablecoins are digital assets that are typically pegged to a sovereign currency. Over the last year, stablecoins pegged to the U.S. dollar increased by nearly 500% to $128 billion outstanding. The report highlights how stablecoins could be vulnerable to runs and fire-sales in ways that could create stress on the broader financial system absent adequate oversight.
The Consumer Financial Protection Bureau was not a member of the working group that prepared this report. However, the agency will be taking several steps related to this market.
First, the CFPB recently solicited public input on how Big Tech companies might leverage their existing online dominance to rapidly scale the use of digital payment networks, including cryptocurrencies. Our solicitation for input follows the agency’s recent issuance of orders to Google, Apple, Facebook, Amazon, Square, and PayPal regarding their payments-related plans and practices. As the Report on Stablecoins notes, established players with large user bases could accelerate the adoption of stablecoins as a payment device, and lead to an excessive concentration of market power.
Second, the CFPB is actively monitoring and preparing for broader consumer adoption of cryptocurrencies. Currently, stablecoins are primarily used for speculative trading in cryptocurrency markets. However, stablecoins may also be used for and in connection with consumer deposits, stored value instruments, retail and other consumer payments mechanisms, and in consumer credit arrangements. These use cases and others trigger obligations under federal consumer financial protection laws, including the prohibition on unfair, deceptive, or abusive acts or practices.
Third, given the rapid growth in stablecoins, we will closely engage with other members of the Financial Stability Oversight Council to determine whether to initiate designation proceedings and ascertain whether certain nonbank stablecoin-related activities or entities are systemically important.