The Bank for International Settlements’ Financial Stability Institute (FSI) published a brief this week comparing stablecoin issuance rules across the European Union, Hong Kong, Singapore, the UK and the United States. Its headline concern is that activity restrictions apply to the issuing entity rather than the wider corporate group. Hence a nonbank issuer’s affiliates can conduct the lending, staking or custody that the issuer itself cannot, and no group wide oversight applies for nonbanks.
The authors note that “where issuance is combined with other activities within a group, the conflicts of interest and contagion risks that the restrictions seek to contain may arise at affiliates where the restrictions do not apply. As the size of the group increases, so do these risks and the potential financial stability concerns.” For example, if an affiliate suffers losses from lending or a crypto custody breach, could that trigger a run on the stablecoin issuer?
While the paper focuses more on legislation and regulation, we explore some recent US OCC trust charter approvals that show both dynamics in motion. Group structuring is already the norm among US stablecoin issuers. At the issuer entity level, US practice is moving quickly, with the OCC reading the GENIUS Act permissible activities expansively.
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