Banks Want Risk Controls Tested at Nonbank Stablecoin Issuers

On September 25, the Office of the Comptroller of the Currency (OCC)’s comment period for payment stablecoin issuer application forms concluded, with banks urging the regulator to focus more on risk controls for nonbank applicants. The July 27 OCC announcement detailed the data prospective issuers would submit under the GENIUS Act, including business plans, financial standing, management, reserves, redemption policies, and risk management programs.

The Bank Policy Institute, American Bankers Association, Consumer Bankers Association, and Independent Community Bankers of America, representing traditional financial institutions, expressed in a joint letter on Friday their desire for the review to encompass non-IDA applicants. They argued that nonbank issuers may not be subject to the same rigorous prudential framework as insured depository institutions (IDIs).

The banks contended that nonbank applicants should demonstrate adequate governance, risk management procedures, operational resilience, cybersecurity practices, and recovery planning. Furthermore, they urged the review to encompass risks that arise after a nonbank commences stablecoin issuance, requiring compliance with applicable law, including federal consumer protection laws, and periodic examinations, where appropriate.

The bank groups also advocated for public comment on stablecoin issuer applications, referencing other OCC licensing proceedings where applications are made available for public review. Additionally, the banks advocated for foreign payment stablecoin issuers to meet home-country capital requirements identical to those imposed on domestic issuers.

The aim was to ensure stablecoins remain for payments and settlements while preventing undue risks to stablecoin holders and users.