Randy Guynn, an eminent American banking lawyer, called for stablecoins to be subject to regulations at the banking level.
Speaking before the United States Chamber of Financial Services Committee, Guynn argued that the stablecoins should offer the same level of security as the guaranteed bank deposits and the money from the Central Bank.
Guynn stressed that any regulation on stables should force issuers to maintain liquidity reserves and capital stamps comparable to those of banks.
“If a payment transmitter has a properly calibrated liquid reserve, a capital stamp and no material amount of other liabilities, the stables of payment should be as safe as the guaranteed bank deposits and the money from the central bank,” said Gynn.
Guynn, president of the Davis Polk & Wardwell LLP financial institutions, said stablecoins are mainly digital private money and should be regulated accordingly. He cited historical parallels, noting that private fund innovations have long been playing a role in financial systems.
However, he warned that without solid supervision, stablecoins could present risks of financial stability similar to those observed in past banking crises.
“People have been free for most of human history to innovate in the creation of private money without interference from the government, including any requirement to obtain the government’s permission to do so,” said Gynn.
The hearing comes in the midst of current discussions on the law on the regulation of stablescoin, a bill which aims to establish clear rules for transmitters. Guynn, who previously contributed to the design of the Meta Stable Diem project, argued that properly regulated stablecoins could improve the efficiency of payments while reducing risks.
His testimony is added to the broader debate on the question of whether the stablecoins should be regulated as banks, monetary market funds or an entirely new financial category.
