Senator Sherrod Brown, Chairman of the Senate Banking Committee, has sent a letter to multiple stablecoin issuers and crypto exchanges. The letter was proceeded by a report issued by the President’s Working Group on Financial Markets that addressed stablecoins, published at the beginning of November.
Senator Brown sent letters to Circle, Coinbase, Gemini, Paxos, TrustToken, Binance.US, Centre, and Tether. Brown requested the following information (an example from the letter sent to Circle):
- Please describe the basic purchase, exchange, or minting process[es] by which customers can acquire USDC for U.S. dollars. In your answer, explain any relevant limitations or qualifications to engaging in and completing that process.
- Please detail the process to redeem USDC and receive U.S. dollars. Here, also, identify any requirements or limits, including any minimum redemption size, waiting period, or qualifications.
- Since USDC’s inception, how many USDC tokens have been issued, and how many have been redeemed? Over the last 12 months, what is the greatest percentage of the USDC in circulation at the beginning of a calendar week to be redeemed in the subsequent seven days?
- Briefly characterize the market or operational conditions that would prevent the purchase, or redemption, of USDC for U.S. dollars, or another digital asset. For purposes of answering this question, do not list or describe legal or regulatory limitations currently described in a user agreement or terms of service. For each condition identified, please provide at least one example that occurred in the past 12 months and its duration.
- Please identify any trading platforms that have enhanced capabilities, privileges, or special arrangements with respect to USDC, identifying those features and their basis (e.g., contractual or common control).
- Please summarize any internal reviews or studies your company has conducted about how specific levels of redemptions would affect USDC, including its convertibility into U.S. dollars, or would affect the financial position of your company.
Senator Brown requested a response by December 3, 2021.
Recently, the political rhetoric has increased regarding the regulation of stablecoins. In effect, Congress is expected to create bespoke regulation to oversee the burgeoning stablecoin market, and if a bill is not forthcoming there is an expectation for regulators to take action minus new rules.
Most all stablecoin issuers desire established rules as this will validate the industry that is more of an improvement on existing payment rails that have been in operation for many years. Stablecoins have the potential to remove intrinsic friction to the transfer of value and payments. Circle, the second largest stablecoin issuer with its dollar-based USDC, is seeking to become a bank as part of its odyssey to run a regulated service.
A copy of the letter sent by Senator Brown is available below.