NCRC, Four Other National Advocacy Groups, Author Letter to Treasury Department over Bank Charters for Stablecoin Issuers

October 28th, 2021

The Honorable Janet Yellen
U.S. Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, DC 20220

Re: Opposition to bank charter for stablecoin issuers

Dear Secretary Yellen,

Americans for Financial Reform, The Center for Responsible Lending, National Community Reinvestment Coalition, National Consumer Law Center (on behalf of its low-income clients), and the Open Markets Institute write to express our opposition to a bank charter for stablecoin issuers that would give them preemption rights without the full obligations and oversight required for insured depository banks.  This letter addresses consumer protection concerns beyond the safety and soundness risks discussed in the recent letter from Americans for Financial Reform.[1]

We support greater regulation of stablecoin issuers. But bank charters have been used to escape consumer protection laws, and we strongly oppose giving bank privileges to entities that do not carry the full responsibilities of traditional banks. In particular, we oppose bank charters for companies that do not hold fiat deposits insured by the FDIC or submit to consolidated supervision of the holding company by the Federal Reserve Board under the Bank Holding Company Act. Even with these conditions, bank charters carry strong risks for consumers, and we oppose the preemption rights even for traditional banks. Certainly, those rights should not be extended to companies that have fewer obligations and are more lightly regulated.

We also fear that providing a bank charter to stablecoin issuers would mislead the public into believing that stablecoins are safer than they are and that the government is endorsing their use. As explained in Americans for Financial Reform’s prior letter, stablecoins are not nearly as “stable” as implied. People should not be risking money they cannot afford to lose by purchasing stablecoins. Yet the word “bank” or a charter bestowed by the federal government will convey the impression that deposits are insured and backed by the federal government. Disclosures about lack of deposit insurance will be ineffective and will not change the expectation that these deposits are safe.

Even requiring FDIC insurance would pose concerns. Providing deposit insurance for stablecoins could improperly put taxpayer funds at risk to back a speculative industry.

Accordingly, we strongly urge you to find a way to regulate stablecoin issuers that does not involve providing them the preemption rights and other privileges of banks when they will not have the same responsibilities, safety and oversight. If you have questions, please contact Lauren Saunders at lsaunders@nclc.org. Thank you for considering our views.

Yours very truly,

Americans for Financial Reform

Center for Responsible Lending

National Community Reinvestment Coalition

National Consumer Law Center (on behalf of its low income clients)

Open Markets Institute

[1]  Letter from Americans for Financial Reform to The Hon. Janet Yellen (Oct. 19, 2021),https://ourfinancialsecurity.org/2021/10/letters-to-regulators-letter-to-the-treasury-presidents-working-group-on-stablecoin-regulation/.

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Redlining and Neighborhood Health

Before the pandemic devastated minority communities, banks and government officials starved them of capital.

Lower-income and minority neighborhoods that were intentionally cut off from lending and investment decades ago today suffer not only from reduced wealth and greater poverty, but from lower life expectancy and higher prevalence of chronic diseases that are risk factors for poor outcomes from COVID-19, a new study shows.

The new study, from the National Community Reinvestment Coalition (NCRC) with researchers from the University of Wisconsin–Milwaukee Joseph J. Zilber School of Public Health and the University of Richmond’s Digital Scholarship Lab, compared 1930’s maps of government-sanctioned lending discrimination zones with current census and public health data.

Table of Content

  • Executive Summary
  • Introduction
  • Redlining, the HOLC Maps and Segregation
  • Segregation, Public Health and COVID-19
  • Methods
  • Results
  • Discussion
  • Conclusion and Policy Recommendations
  • Citations
  • Appendix

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