Meanwhile, banks, which are the focus of our federal regulatory efforts for holding and transferring money, have largely not engaged in holding, transferring, or <gasp> issuing digital currencies, and federal banking regulators in the United States have remained largely silent on the permissibility of these activities.27 The Office of the Comptroller of the Currency (OCC) sought to carve out a special-purpose charter—its so-called “fintech charter”—presumably to bring some of these activities under the OCC’s regulatory umbrella, but it has since been mired in litigation over issuing these special-purpose charters with states in the U.S. that wish to license these activities under local law.28 Separately, the Bureau of Consumer Financial Protection, which has authority to write rules governing certain consumer accounts and payment products, determined it would further analyze digital currencies and did not try to bring them into its purview in a recent amendment to its Regulation E.29 To be sure, states within the U.S. have begun to adopt laws and regulations for digital currency businesses. New York and Wyoming, to cite two examples, have adopted digital currency-specific regimes. There is, however, little coordination in the approach at the state level,30 which highlights that a state-by-state approach risks both inconsistent treatment and the possibility of a “race to the bottom” on licensing standards that could be reminiscent of the wildcat era. The challenges states will face in crafting sensible rules are only amplified with respect to digital currencies, which tend to operate without borders.

If you were a worrier like me, would you worry that we are putting off alternative approaches until new problems exhaust old solutions? Would you worry about how effectively we will respond if a digital currency achieves critical mass? Governor Quarles highlighted this latter concern in his recent remarks at the European Banking Federation.31 He noted that stable coins do not pose risk to financial stability today but that they bring with them the potential for scale that could pose regulatory challenges from a financial stability standpoint in the future. But knowing that regulators in the U.S. are already dealing with concerns over fraud and the prospect of other forms of misconduct related to digital currencies, and acknowledging  Governors Quarles’ concerns about financial stability, would it behoove us to start identifying areas of focus for crafting a regulatory response that is more proactive? Pablo Hernández de Cos, Chairman of the Basel Committee on Banking Supervision (BCBS) and Governor of the Bank of Spain, remarked in November that digital currencies “do not reliably perform the standard functions of money and are unsafe to rely on as a medium of exchange or store of value.”32 That sounds like a problem. We have dealt with a somewhat similar problem before. Under the National Bank Act, the United States chose to reform its currency system by adopting a new regulatory regime for national banks—the would-be issuers of stable private currencies (that is, national bank notes)—and by crafting requirements for these issuers to backstop their currencies with safer government-issued bonds.