WASHINGTON—Stablecoins have the potential to “fundamentally alter the landscape of banking,” according to the head of the FDIC.
Speaking to the issue “The Prudential Regulation of Crypto Assets” at the Brookings Institution, Acting FDIC Chairman Martin Gruenberg said “economies of scale associated with payment stablecoins could lead to further consolidation in the banking system or disintermediation of traditional banks,” Pymnts.com reported.
The network effects payment stablecoins bring could change the way credit is extended, according to Gruenberg, who added this could be done “by facilitating greater use of fintech and non–bank lending — and possibly leading to forms of credit disintermediation that could harm the viability of many U.S. banks and potentially create a foundation for a new type of shadow banking.”
While he didn’t take a position on the question of whether state-chartered banks should be allowed to issue stablecoins, other than saying both should be subject to “prudential regulation and oversight,” Pymnts.com reported Gruenberg did warn that “the potential for non–bank stablecoins to disintermediate community banks from their local communities is an issue that should also be carefully explored and considered.”
Another Issue Raised
Another issue he said needed policy consideration is how “payment stablecoins would appropriately interact with the Federal Reserve’s upcoming FedNow service, as well as the potential development of a U.S. central bank digital currency,” according to the report.
Gruenberg did differentiate between stablecoin’s use in the trading of cryptocurrencies — which is how the vast majority are used now — and their use in payments, Pymnts.com noted.
“We are at a pivotal policy point with this new technology and asset class, much as we were during the free banking era of the late 1800s and early 1900s,” he was quoted as saying.
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