Digital Assets and the Future of Finance: The President’s Working Group on... (EventID=114398)

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Connect with the House Financial Services Committee Get the latest news: https://democrats-financialservices.house.gov/ Follow us on Facebook: https://www.facebook.com/HouseFinancialCmte Follow us on Twitter: https://twitter.com/FSCDems ___________________________________ On Tuesday, February 08, 2022, at 10:00 a.m. (ET) full Committee Chairwoman Waters and Ranking Member McHenry will host a virtual hearing entitled, “Digital Assets and the Future of Finance: The President’s Working Group on Financial Markets’ Report on Stablecoins." ___________________________________ Witness for this one-panel hearing will be: • The Honorable Nellie Liang, Under Secretary for Domestic Finance, U.S. Department of the Treasury ___________________________________ Overview The past decade has brought a wave of financial innovation, including an explosive growth of digital assets made possible by advances in cryptography and distributed ledger technology. Digital assets such as cryptocurrencies, stablecoins, and central bank digital currencies (CBDCs) are all digital representations of value. In response to this wave of innovation, the House Committee on Financial Services has held hearings examining the emergence of cryptocurrencies, exploring concerns about investor protection, the implications of digital assets for consumer privacy and financial inclusion, the promises and perils of central bank digital currencies, and perspectives from CEOs of large cryptocurrency industry participants, including market exchanges and stablecoin issuers. Building off this prior work, this hearing will focus on the rapid growth of stablecoins and will discuss findings from the “Report on Stablecoins” by the President’s Working Group on Financial Markets (PWG). The PWG consists of the U.S. Department of the Treasury, the Federal Reserve, the Securities and Exchange Commission (SEC), and the Commodity Futures Trading Commission (CFTC). The PWG was joined by the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) in issuing this report. Stablecoin Uses and Market Size Stablecoins are a subset of cryptocurrencies that stablecoin issuers assert are pegged to a stable reserve asset such as the US dollar. Stablecoins are primarily used in the U.S. to buy or sell other cryptocurrencies or to lend or use as collateral to borrow other cryptocurrencies or fiat currency. Stablecoins may have vastly different operational structures and reserve compositions. Reserve assets backing stablecoins can include fiat currencies, traditional financial assets including commercial paper, or other digital assets or algorithms. Some have compared stablecoins to private currency issued by banks before the practice was curtailed with the National Bank Act of 1863, and a shift was made to a single sovereign currency. Others have noted that stablecoins’ management and structuring of the reserve funds resemble existing practices for registered securities products, such as money market funds (MMFs), exchange-traded funds (ETFs), or security-based swaps. Stablecoins could also find parallels in traditional payment systems, bank deposits, or other forms of financial services and products. As of February 3, 2022, stablecoins reached an estimated $174 billion in market capitalization. Of note, the market value of the digital asset ecosystem as a whole has been volatile, expanding significantly from approximately $500 billion in 2020 to almost $3 trillion as of November 2021 before dropping to $1.63 trillion in January 2022. Although stablecoins represent a relatively small fraction of the digital asset industry’s total value at 5%, they facilitated more than 75% of trading on all digital asset trading platforms as of October 31, 2021. President’s Working Group “Report on Stablecoins” While stablecoins have the potential to address shortcomings of the existing payment system such as the potential for lower-cost and real-time payments, they pose legal, regulatory, and oversight challenges, and may present risks to monetary policy, national security, financial stability, and fair competition.18 In response to these challenges, the PWG released its “Report on Stablecoins” (the Report) on November 1, 2021, including recommendations to Congress on legislation to address market risks potentially created by stablecoin transactions. The Report provides a number of legislative recommendations to Congress to improve oversight and regulation of stablecoins in a manner that complements existing authorities with respect to market integrity, investor protection, and illicit finance.... Hearing page: https://democrats-financialservices.house.gov/events/eventsingle.aspx?EventID=409026