Senate Committee Chair Questions Stablecoin Issuers About Their Products | Practical Law

Senate Committee Chair Questions Stablecoin Issuers About Their Products | Practical Law

Senator Sherrod Brown, Chair of the Senate Committee on Banking, Housing, and Urban Affairs, sent letters to stablecoin issuers and exchanges questioning them about their products and what measures they are taking to protect consumers in light of the recent report on stablecoins by the President's Working Group on Financial Markets.

Senate Committee Chair Questions Stablecoin Issuers About Their Products

Practical Law Legal Update w-033-6442 (Approx. 6 pages)

Senate Committee Chair Questions Stablecoin Issuers About Their Products

by Practical Law Finance
Published on 06 Dec 2021 • USA (National/Federal)
Senator Sherrod Brown, Chair of the Senate Committee on Banking, Housing, and Urban Affairs, sent letters to stablecoin issuers and exchanges questioning them about their products and what measures they are taking to protect consumers in light of the recent report on stablecoins by the President's Working Group on Financial Markets.
On November 23, 2021, Senator Sherrod Brown, Chair of the Senate Committee on Banking, Housing, and Urban Affairs, issued a press release and provided copies of eight letters he sent to stablecoin issuers and exchanges questioning them about their products and what measures they are taking to protect consumers in light of the recent report on stablecoins by the President's Working Group on Financial Markets (see Legal Update, President's Working Group on Financial Markets Issues Report Supporting Federal Regulation of Stablecoins and Urging Congressional Action). Senator Brown expressed concern about the risks to consumers and investors because of the difficulties in understanding how stablecoins work and the risks associated with them, which he asserted are hidden by many companies in fine print.
The letters were sent to:
The letters addressed the same six questions to all companies:
  • Describe the basic purchase, exchange, and minting process by which your product is acquired. Describe any limitations or qualifications.
  • Detail your company's redemption process.
  • Since inception, how many tokens have been issued/redeemed?
  • Detail the market or operational conditions that would prevent the purchase or redemption of the product for dollars or a digital asset.
  • Identify any trading platforms with which you have enhanced capabilities, privileges, or special arrangements.
  • Summarize any internal studies your company has conducted on how specific levels of redemption would affect the product, including its convertibility to US dollars.
The following two additional questions were asked of Coinbase, Gemini, and Binance.US:
  • How would customers be impacted by a sudden loss of liquidity of one or more of your stablecoins?
  • What criteria does the company use to evaluate between stablecoins following a forking event? A forking event is when there is a change in the basic rules of a blockchain that result in a split that produces a second chain with a shared history with the first but headed in a new direction.
Senator Brown requested all companies respond to their letter by December 3, 2021.
For more information on cryptocurrency and VC regulation, see Cryptocurrency and Virtual Currency Regulatory Tracker.