The July 27 OCC notice outlined the information prospective issuers would provide under the GENIUS Act, including business plans, financial condition, management, reserves, redemption policies and risk management programs.
Traditional financial institutions, represented by the Bank Policy Institute, American Bankers Association, Consumer Bankers Association and Independent Community Bankers of America, said in a joint letter on Friday that they want the review expanded for applicants that are not subsidiaries of insured depository institutions (IDIs).
“For example, the OCC should require a non-IDI applicant to demonstrate the adequacy of its governance, risk management procedures, operational resilience, cybersecurity practices and recovery planning,” the letter said.
The groups tied the request to the different regulatory structures under which banks and nonbanks operate. Nonbank applicants “may not be subject to the same robust federal prudential framework to which every IDI is subject,” according to the letter.
The banks also want the review to cover risks that arise after a nonbank begins issuing stablecoins. A nonbank applicant should demonstrate that it can comply with applicable law, “including federal consumer protection laws,” the letter said, calling for regular examinations, where appropriate, covering compliance and related risk management. The request would extend the OCC’s assessment from whether an issuer has adequate operational controls to how it manages its obligations to stablecoin users once it is operating.
The bank groups also want stablecoin issuer applications to be opened to public comment. They pointed in the letter to other OCC licensing proceedings in which applications are made available for public review. The banks have also contended that foreign payment stablecoin issuers should face home-country capital requirements consistent with those applied to domestic issuers.
The letter said the goal should be to preserve stablecoins for “payments and settlements” while avoiding “undue and unnecessary risks” to stablecoin holders and users.
Financial Institutions Prepare for Stablecoins
We’d love to be your preferred source for news.
Please add us to your preferred sources list so our news, data and interviews show up in your feed. Thanks!
The regulatory work comes as financial institutions prepare for stablecoin activity that remains limited today but is expected to become more significant.
The PYMNTS Intelligence report “Credit Unions Build for Digital Money’s Next Chapter” found in September that 34% of credit unions classified as quick followers said they were operationally prepared to support stablecoins, while only 9% were actively engaged. Meanwhile, 33% of credit union executives said they expect stablecoins to be very or extremely significant to payments and product strategy in six years, compared with 3% over a three-year period.
The data showed that financial institutions are deciding whether to support stablecoins while regulators set the standards issuers must meet.
Sept. 25 was only the first deadline for this particular OCC proceeding.
The agency said in its July notice that it will publish a second notice with a 30-day comment period. The next comment period could therefore provide a fuller picture of how nonbanks respond to the additional tests sought by the banking groups.
Separate stablecoin comment periods opened last week.
The Federal Reserve requested comment on two GENIUS Act proposals, PYMNTS reported Thursday (Sept. 24). One addresses reserve assets, capital, risk management and other requirements for board-supervised payment stablecoin issuers. The other covers applications by board-supervised banks seeking approval to issue payment stablecoins through subsidiaries.
The Fed proposals join work underway at the OCC and Federal Deposit Insurance Corp. as the federal banking agencies establish stablecoin requirements for institutions under their supervision, PYMNTS reported Friday.
The issues are on the table, spanning governance, risk management, operational resilience, cybersecurity and recovery planning. The next comment round will provide another opportunity for prospective issuers to respond to whether these controls should receive additional examination before they are authorized to issue payment stablecoins.
Add as Preferred Source
