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Keeping an eye on changes in the financial system over technology, the OCC’s chief economist, a body that regulates the banking system and is part of the U.S. Treasury, produced a document on the issuance of licenses for fintechs. In the text, Charles Calomiris points out the benefits of giving a license, for example, to stablecoin issuers.

He recognizes issues to be acknowledged about licenses for issuers of stablecoins, such as business models, or how to examine and regulate algorithms. However, he sees “several advantages” in the measure. Thus, the report points out that there are “substantial advantages in terms of efficiency, convenience and stability” with a national network of banks with stablecoins that emit non-depository liabilities”.

The economist believes that the official banking system “can and will evolve in the coming decades if special interests fail in an attempt to preserve the status quo”. In the short term, this evolution would include granting a license to fintechs that are shadow banks. Also called the shadow banking system, it concerns an informal, unregulated financial system.

American CB may be a hindrance to license for stablecoin issuers

Giving these allowances would enable consumers to benefit from the “credible examination of algorithms and accounting and management skills”. Furthermore, encouraging the migration of this shadow economy to the regulated world would ensure that dishonest people or deceptive practices could not cause harm to consumers.

However, the path is not strewn with roses. And Calomiris acknowledges that the Federal Reserve, or Fed, the U.S. central bank, may object to the measure. The Fed “could lose its monopoly on the payment system as blockchain-based networks develop”, he says.

But he hopes the U.S. Central Bank will be guided “more in the public interest than by a desire to preserve its power”. And he concludes that, as far as we know, the Fed has not adopted an official position on licenses for fintechs.