Stablecoins and the Push for Standardization

The Need for Standards

Michael Hsu, the acting head of the United States Office of the Comptroller of the Currency (OCC), has thrown out a bold idea: stablecoins need the kind of regulatory standards that were crucial for the early days of the internet. Without these “shared standards,” stablecoins risk getting lost in a chaotic digital bodega where anything goes – and we all know how well that ends!

What’s Wrong with Current Stablecoins?

During a recent gig at the Artificial Intelligence and the Economy event in Washington D.C., Hsu pointed out the interoperability issues plaguing stablecoins. It’s like trying to connect a VHS player to an HDMI screen—good luck! He emphasized the importance of creating a stablecoin framework that’s as robust as the standards laid out by leading tech authorities like the Internet Engineering Task Force.

Collaboration is Key

Hsu’s vision calls for collaboration among various stakeholders—including the crypto industry and U.S. government entities like the National Institute of Standards and Technology (NIST). Imagine a meeting of the minds where tech wizards and bureaucrats sit around a table brainstorming like it’s a tech startup in Silicon Valley. This joint effort could pave the way for a strong foundation upon which stablecoins can thrive.

The Regulatory Tug-of-War

Meanwhile, the government has been embroiled in a bit of a regulatory tug-of-war over stablecoins. In November 2021, the President’s Working Group on Financial Markets issued a report proclaiming the urgency for legislation that imposes “appropriate federal oversight” on stablecoin issuers, akin to the scrutiny faced by banks. On the other hand, lawmakers like House member Patrick McHenry are waving the flag for a more state-centered approach, looking to decentralize the regulatory landscape.

Recent Developments

Just last week, the OCC made waves by issuing a consent order against Anchorage Digital. This little drama unfolded due to the company’s lack of a compliance program that measures up to the Anti-Money Laundering standards—proof that the regulatory agencies are not simply sitting on their hands while the private sector plays catch up. Coincidentally, Senator Pat Toomey has been advocating for legislation that would free “payment stablecoins” from the heavy yoke of U.S. securities regulations.