The price drop in stablecoin TerraUSD and the collapse in its associated cryptocurrency LUNA has triggered a global call for stablecoin regulation. From the U.S. Treasury Secretary to the Securities and Exchange Commission (SEC) or the Bank for International Settlement (BIS), regulators around the world have voiced concerns about stablecoins and the need to enact regulations.
Big Tech firms had a quiet week, as the United Kingdom announced new rules that it is planning to introduce in the next months. One of the bills that could affect Big Tech the most likely won’t be adopted until the next year.
Financial and banking regulators in Europe and the United States issued opinions on nonbank lenders and fair lending, and they continued their work on banking merger and artificial intelligence (AI) regulations.
Crypto and Stablecoins
The loss of value in TerraUSD has given good arguments to some regulators that stablecoins are susceptible to panic-based runs. And a run is what happened earlier this week. U.S. Treasury Secretary Janet Yellen mentioned the TerraUSD collapse Tuesday morning (May 10) in a hearing before the Senate Banking Committee as it discussed that report, using it to point out the “risk to financial stability” stablecoins pose.
Pablo Hernández de Cos, chair of the Basel Committee on Banking Supervision and governor of the Bank of Spain, warned Thursday (May 12) that fast-paced developments in decentralized finance (DeFi) and crypto assets necessitate a proactive and forward-looking regulatory and supervisory approach. Despite some assets being considered “stable” and “currencies,” they often fail on both counts, Hernández de Cos argued.
Also on Thursday, SEC Commissioner Hester Peirce said there could be some movement around stablecoins to enact new regulations. And SEC Chair Gary Gensler has said his agency should look into stablecoin risks, with the concerns mounting about financial stability and monetary policy.
In the middle of the stablecoin and crypto meltdown, Coinbase registered with the SEC “to have better access to capital markets quickly and efficiently when needed,” and while the company has no immediate plans to offer securities at this time, with this registration Coinbase will “be able to offer and sell securities in the future.” The registration could enable Coinbase to quickly offer on its platform any crypto asset that could be considered a security by the SEC or by a court.
The U.K. government revealed Tuesday its legislative agenda for the next parliamentary session. The most important bill for Big Tech is the Online Safety Bill, which seeks to curb online harm by significantly increasing Big Tech’s responsibilities to monitor the content posted on their platforms. Other bills, like the Brexit Freedom Bill, Media Bill or Data Reform Bill will have an impact on Big Tech too.
A bill aimed at creating a new tech watchdog with powers to sanction Big Tech companies if they breach competition and consumer rules will only be discussed as a “draft bill.” This means that while the government is still planning to introduce legislation to underpin the powers of the Digital Markets Unit (DMU), it will do so in “due course,” and it may not be in the parliamentary session that starts Friday (May 13).
The Consumer Financial Protection Bureau (CFPB) published an advisory opinion Monday (May 9) to affirm that banks and other lenders need to follow fair lending laws when canceling loans or changing terms and not just during the application process. Rules apply before and after the bank approves the credit.
On the same day, the CFPB defended its payday lender rules in court. Industry trade associations claimed that payday rules enacted in 2017 run afoul of federal rulemaking procedures and the Supreme Court precedents and they should therefore be struck down.
Lending rules may also be subject to regulatory review in Europe. The European Banking Authority (EBA) has warned that the largely unharmonized regulatory regimes across Europe regarding nonbank lending may create challenges for stakeholders, including regulators, and it recommended changes that may affect lending solutions like buy now, pay later (BNPL) and peer-to-peer (P2P) platforms.
Speaking at an event Monday, Acting Comptroller of the Currency Michael Hsu discussed the need to rethink bank merger assessment and directed his team to work with the Department of Justice (DOJ) and other banking regulators to review the merger frameworks.