Governor Brainard's comments on stablecoin market concentration are important. Ms. Brainard notes that there "is a high degree of concentration among a few dollar-pegged stablecoins: as of January 2022, the largest stablecoin by market capitalization made up almost half of the market, and the four largest stablecoins together made up almost 90 percent" (pp. 1-2). Moreover, she highlights the fact that stablecoins are being used as a means of access to decentralized financial markets and…

The CRS report raises a number of important policy questions in addition to the question of which entities should be considered and regulated as banks.

Such questions include:

What, if any, anti-competitive effects does consolidation of the banking system have?

What are the implications of the consolidation of the banking system with respect to systemic financial risk?

What is the threshold for considering an entity a bank, and what, if any, impact does the…

Notably, the FRB identifies as a significant risk, that a U.S. CBDC may lead to a disintermediation of private sector financial institutions by allowing investors to hold their money directly with the government, rather than through a bank or money market fund.

Sebastian Souchet is a law clerk in the Financial Services Practice. Fried Frank's Steven Lofchie contributed to this comment.

Ms. Massari and Ms. Allen reject - each for separate (but not unrelated) reasons - the recommendation of the PWG to regulate stablecoin issuers as insured depository institutions. While Ms. Massari identifies several economic and regulatory issues posed by applying the insured depository institution framework to the stablecoin business model, Ms. Allen emphasizes the various systemic consequences and risks of regulating stablecoin issuers under that framework. On the whole, U.S. policymakers…