The Federal Reserve Committee warns that stablecoins could pose risks to bank deposits and credit capacity

Members of the Federal Reserve's Community Depository Institutions Advisory Committee (CDIAC) have expressed concerns about stablecoins issued by non-bank institutions, according to the recently disclosed minutes of its April 10 meeting. The committee believes that such stablecoins could accelerate the outflow of bank deposits and reduce the ability of community banks to provide loans to small and medium-sized enterprises and households. The committee compared stablecoins to the impact of money market funds on the banking industry in the late 20th century, noting that they are similar to central bank digital currencies (CBDCs), which could divert the deposit base of the banking system. In particular, it emphasizes that the current stablecoins are not subject to equivalent liquidity regulatory requirements, which could lead banks to scale back credit, particularly affecting small borrowers who rely on local banking services. The committee recommends that stablecoins be included in the financial stability regulatory framework, requiring uniform standards for banks and non-bank issuers This position echoes Federal Reserve Chairperson Jerome Powell's remarks on April 16, in which he acknowledged the broad appeal of stablecoins but stressed the need for an appropriate regulatory system.