Washington, D.C. — The U.S. Senate Committee on Banking, Housing and Urban Affairs is hosting a hearing today titled “Stablecoins: How Do They Work, How Are They Used, and What Are Their Risks?” Paige Pidano Paridon, BPI senior vice president and associate general counsel, issued the following statement in response:
BPI is encouraged by the Senate Banking Committee’s examination of the serious risks of stablecoins identified by the President’s Working Group and numerous global policymakers and the Committee’s quick response to begin a constructive and meaningful dialogue about these assets. Many stablecoin issuers claim their coins present little risk to consumers or the financial system because they are “backed 100% by reserves.” In reality, many are backed by commercial paper and more comparable to 2008-style prime money funds that destabilized the financial system. These coins are anything but stable and hardly the riskless investment they pretend to be. Moreover, even safer and more “stable” stablecoins still present risks, including financial stability risk posed by destabilizing flights to perceived safety. We are optimistic that the Committee recognizes the very real risks to consumers and the economy presented by stablecoins and will act expeditiously to implement statutory safeguards to encourage responsible innovation.
Learn more about BPI’s previous research and analysis on stablecoins by clicking the links below:
- American Banker BankThink: Stablecoins Are Backed by ‘Reserves’? Give Us a Break.
- Making Stablecoins Stable: Is the Cure Worse than the Disease?
- BPI Issues Statement in Response to Stablecoin Report by President’s Working Group and Financial Regulators
- Predicting Stablecoin Regulation: 5 Key Takeaways from Gorton and Zhang’s “Taming Wildcat Stablecoins”
- Facebook’s Novi Pilot: What We Know
About Bank Policy Institute.
The Bank Policy Institute (BPI) is a nonpartisan public policy, research and advocacy group, representing the nation’s leading banks and their customers. Our members include universal banks, regional banks and the major foreign banks doing business in the United States. Collectively, they employ almost 2 million Americans, make nearly half of the nation’s small business loans, and are an engine for financial innovation and economic growth.