Yesterday, Randal Quarles, the departing Federal Reserve Governor responsible for Financial Stability, spoke about stablecoin regulation during a speech at the American Enterprise Institute. He endorsed most of the recommendations by the Presidents Working Group (PWG) stablecoin report, but not all.
Quarles’ biggest disagreement is with the notion that wallet providers should not be associated with commercial entities. That’s likely a response to Meta initiating Diem and its Novi wallet. However, the regulation was originally created to prevent commercial companies from benefiting from an unfair advantage through borrowing from a bank it owns. And that’s not the concern for stablecoins.
Talking about the commercial entity wallet exclusion, Quarles said, “It is not at all clear what regulatory interest would be furthered by such a limitation, which is much more restrictive than we require for nondigital assets.”
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