Treasury Under Secretary for Domestic Finance Nellie Liang this week explored the appropriate regulatory structure to address stablecoin risks.
Speech: In her remarks, Liang discussed two possible stablecoin regulatory models:
Bank model: Stablecoins would be backed by bank assets, capital, and liquidity buffers, though safeguards would be needed to prevent significant losses for bank and customers.
Nonbank model: Stablecoins would be backed with safe assets without a direct tie to the banking system, which could interfere with intermediation if nonbank stablecoins compete with bank deposits.
Background: The discussion of a nonbank model is a departure from last year’s stablecoin report from the President’s Working Group on Financial Markets, which advocated legislation that would require stablecoin issuers to be insured depository institutions.