Yesterday, the U.S. President’s Financial Markets Working Group (PWG) released a report titled “Statement of the President’s Financial Markets Working Group on Key Regulatory Issues Related to Stablecoins”, which clarifies innovation, regulation, compliance, legal basis, additional Five major issues of protection measures.It is mentioned that the supervision of stablecoins can be based on federal securities, commodities, and derivatives regulations; a 1:1 reserve asset value support for stablecoins is advocated; clear information disclosure should be made on stablecoin projects, and stablecoin projects also need to obtain and verify the identity of all transaction parties and monitor transactions; for stablecoins anchored to multiple currencies, more restrictions may be required.The clarification and clarification of the key regulatory issues of stablecoins in the United States this time is a double-edged sword: regulatory rules have become clearer, and stablecoin activity information has become more transparent, but at the same time, users’ transaction information and identity privacy will be fully exposed to under supervision. Beep News extracted the main part of the Statement and translated it as follows:The United States encourages innovation in responsible payments. Digital payments, including dollar-backed and other stablecoin projects used as payment systems, have the potential to improve efficiency, increase competitiveness, reduce costs, and foster broader financial inclusion. Digital payment systems, including stablecoin projects, should be designed and operated in a responsible manner to effectively manage risk and maintain the continued stability of the U.S. domestic and international financial and monetary systems.Stablecoin projects must comply with applicable U.S. laws and regulatory requirements. These requirements can help achieve a range of policy objectives, including (maintaining financial) safety and soundness, combating illicit financing, protecting end users and (ensuring) market integrity. In particular, stablecoin projects of greater potential size, complexity and interconnectedness should take into account and manage any higher risks to participants, end users and the wider financial system. Stablecoin projects should comply with the same requirements as other projects that perform the same functions and activities and pose the same risks, in order to comply with the general principle of "same business, same risk, same rules".Stablecoin participants and stablecoin projects must meet all applicable anti-money laundering and counter-terrorist financing regulations, as well as comply with sanctions obligations, before launching to the market. In the U.S., these obligations include registering with the Financial Crimes Enforcement Network (FinCEN); developing, implementing, and maintaining an effective anti-money laundering program; (complying with) recordkeeping and reporting requirements, including reporting suspicious activity, and customizing risk-based sanctions plan.According to the standards of the Financial Action Task Force (FATF), anti-money laundering, counter-terrorist financing and counter-proliferation financing mechanisms apply to digital assets, including stablecoin projects, and their service providers. The standard requires the public and private sectors to conduct adequate risk assessments to understand the risks of digital assets. Under the anti-money laundering, anti-terrorism financing and sanctions mechanism, the United States implements functional supervision of digital assets, including stablecoins and digital asset service providers, which is consistent with FATF standards. The US also expects (stablecoins) to put in place compliance procedures designed to meet these obligations before they are introduced to the market.Depending on their design and other factors, stablecoins may constitute securities, commodities or derivatives subject to U.S. federal securities, commodities and/or derivatives laws. Accordingly, the Federal Securities Act and/or the Commodity Exchange Act will govern stablecoins, stablecoin transactions, and/or participants therein. Whether stablecoins are securities, commodities or derivatives will depend on the relevant facts and circumstances.When stablecoins, primarily for retail payments, are adopted at scale in the US, the associated risks may mean that these scenarios require additional safeguards. We encourage relevant participants in stablecoin projects and their functional, operational, trading and risk management design to adhere to key principles, including:
- To promote financial stability, stablecoin projects should be designed to address potential financial stability risks, including large, potentially disorderly redemptions and general business losses. Stablecoin projects should have systems, controls, and operations in place to manage these risks, including the protection of reserve assets.
Strong reserve asset management measures include ensuring 1:1 reserve asset backing, ensuring sufficient funds to absorb losses and meet liquidity needs. U.S. dollar-backed stablecoin projects should hold high-quality U.S. dollar-denominated assets; deposit these assets in U.S.-regulated entities; utilize multi-party escrow; and limit debtors to high-quality debtors to ensure investment safety.- In order to protect end users and comply with fair and transparent financial services (principles), stablecoin projects should provide enforceable holders' direct claims on issuers or reserve assets to ensure that holders can promptly deposit stablecoins1: 1 Converted to base fiat currency (net value after deduction of fees). Stablecoin projects should clearly disclose the rights of stablecoin holders. Claiming procedures should minimize counterparty risk for stablecoin holders, including ensuring that reserve assets are held out of bankruptcy and protected from other creditors of stablecoin project participants.
Clear information disclosure should be made to promote information transparency and enhance end-users' right to know. Disclosed information should include the stablecoin project’s operational and governance structure, for example, the functions and activities within the project that provide the stablecoin, who is responsible for those functions and activities, detailed financial information supporting the value of the stablecoin, and any fees, foreign exchange exposure and participation A description of the entity's potential conflict of interest. Stablecoin projects should provide clear processes around problem solving, protecting users from unfair or fraudulent practices, and protecting user data.- To promote market integrity, stablecoin projects must meet all applicable anti-money laundering/counter-terrorist financing and sanctions obligations. Stablecoin projects designed for anonymous or pseudonymous transactions could attract illicit parties and, without appropriate mitigations, could allow key public policy objectives to be circumvented. Like other entities subject to AML/CFT and sanctions obligations, stablecoin projects must conduct user authentication and risk assessments, monitor transaction activity, and report to authorized agencies (such as regulatory and law enforcement agencies) for AML/CFT purposes. agencies) provide and maintain records, report suspicious activity, screen for sanctions obligations, etc.
Vendors must implement compliance with the stablecoin project’s AML/CFT requirements and update as appropriate (requirements and actions) before the stablecoin is brought to market. Individual mitigation measures will vary but must include an assessment of risk, regulatory compliance, and an effective AML/CFT compliance program. Additionally, stablecoin projects should be able to capture and verify the identity of all transacting parties, including those using non-custodial wallets.- To increase operational resilience, stablecoin projects should employ a robust risk management framework. Stablecoins should ensure a high degree of security and operational reliability including network security, and should have sufficient scalable capacity. Stablecoin projects should have reliable data collection, storage, and protection systems. Business continuity management (rules) should be properly designed to ensure full and rapid restoration of operations and fulfillment of obligations in the event of a disruption.
- In order to facilitate the good functioning of the payment and transaction markets, stablecoin projects should set up data management systems to record and protect the data and information collected and generated during operations. There should also be robust procedures for recording, retaining and reporting real-time data, including price and transaction information, for dissemination to market participants and regulators.
- To promote macroeconomic and international monetary stability, stablecoin projects should not compromise citizens' confidence in domestic fiat currencies and the stability of fiat currencies. In the United States, for those stablecoins that cannot be exchanged 1:1 with the base legal currency (net value after deducting fees), and for those stablecoins whose value is determined by more than one legal currency (for example, stablecoins anchored to multiple currencies), Additional restrictions may be required.
- To facilitate comprehensive cross-border regulation, stablecoin projects operating in multiple jurisdictions should provide the necessary information and documentation directly to all relevant national authorities. Authorities could establish cross-border information-sharing mechanisms to facilitate oversight and other mechanisms to ensure compliance and enforcement. In the United States, stablecoin projects may need to establish an onshore entity, use a US-regulated entity as an intermediary, and/or consider other factors.
Conclusion: PWG wrote in the report that "this is the result of a preliminary assessment of some key regulatory issues for stablecoins, and it welcomes dialogue on this statement. US authorities continue to assess the technology, market environment and regulatory framework related to stablecoins." .” The regulation of the encryption industry has been on the way. 
