The Clearing House Association L.L.C. (TCH) submitted comments in response to the Committee on Payments and Market Infrastructures’ (CPMI) and International Organization of Securities Commissions’ (IOSCO) (together, CPMI-IOSCO) consultative report on the application of the principles for financial market infrastructures to stablecoin arrangements, titled “Application of the Principles for Financial Market Infrastructures to Stablecoin Arrangements.” TCH commended CPMI-IOSCO for its work addressing stablecoins, expressed strong agreement that all of the principles should apply, and made recommendations to enhance application of the principles to stablecoin arrangements. TCH recognized that while certain design choices that may be made in establishing stablecoin arrangements may present challenges to conformance with the principles, it is important for the protection of the financial system that the full breadth of the principles apply to stablecoins arrangements. TCH’s comments are consistent with past advocacy related to digital assets, and recommendations set forth in TCH’s paper on central bank digital currency (CBDC). 

TCH made the following recommendations to further enhance application of the principles to stablecoin arrangements:

• The guidance should make clear that stablecoin arrangements that are not designed in compliance with the principles may be prohibited if they are, or are likely to become, systemically important.
• The guidance relating to the determination of whether a particular stablecoin arrangement is systemically important (section 2.1.3) should be revised so that authorities take into account whether or not there is an existing regulatory framework in place to appropriately address the risks posed.
• Due to the ability of stablecoin arrangements to scale rapidly, the guidance should be revised to eliminate the “discretion” to consider potential growth and future state of stablecoin arrangement and affirmatively require such consideration.
• The guidance should be revised to include a requirement that when settlement is conducted using stablecoin instead of central bank money, the issuer of the stablecoin needs to be an appropriately regulated financial institution or must deposit the funds at a bank or financial institution that is appropriately regulated, supervised, and has sufficient controls in place to manage the risks arising from the stablecoin arrangement.

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