U.S. banking lawyer: Stablecoins need regulation similar to banks

Randy Guynn, a prominent U.S. banking attorney, has called for stablecoins to be subject to bank-level regulations.

Speaking before the U.S. House Financial Services Committee, Guynn argued that stablecoins should offer the same level of safety as insured bank deposits and central bank money. 

Guynn emphasized that any stablecoin regulation should require issuers to maintain liquidity reserves and capital buffers comparable to those of banks.

“If a payment stablecoin issuer has a properly calibrated reserve of liquid assets, capital buffer, and no material amount of other liabilities, payment stablecoins should be as SAFE as insured bank deposits and central bank money,” Guynn contended.  

Guynn, chairman of the Financial Institutions Group at Davis Polk & Wardwell LLP, stated that stablecoins are essentially digital private money and should be regulated accordingly. He cited historical parallels, noting that private money innovations have long played a role in financial systems. 

However, he warned that without robust oversight, stablecoins could pose financial stability risks similar to those seen in past banking crises.

“People have been free during most of human history to innovate in the creation of private money without government interference, including any requirement to obtain government permission to do so,” Guynn wrote. 

The hearing comes amid ongoing discussions on the Stablecoin Regulation Act, a bill that aims to set clear rules for issuers. Guynn, who previously contributed to the design of Meta’s Diem stablecoin project, argued that properly regulated stablecoins could enhance payment efficiency while reducing risks.

His testimony adds to the broader debate over whether stablecoins should be regulated as banks, money market funds, or an entirely new financial category.