On November 23, 2021, the Senate Committee on Banking, Housing, and Urban Affairs sent a series of letters to prominent stablecoin issuers and cryptocurrency exchanges. Citing the recent President’s Working Group on Financial Markets report on stablecoins, the letters seek to clarify basic operational features of various stablecoins which the Committee believes is critical to improving its understanding of digital assets.

The letters vary slightly from company to company, particularly between issuers and exchanges, but generally seek a subset of the following information:

• Please describe the basic purchase, exchange, or minting processes by which customers can acquire your stablecoin, and other stablecoins traded on your exchange, for US dollars. In your answer, explain any relevant limitations or qualifications to engaging in and completing that process.

• Please detail the process to redeem or exchange your stablecoin, as well as any other stablecoins on your platform, and receive US dollars. Here, also, identify any requirements or limits, including any minimum redemption size, waiting period, or qualifications.

• Since the inception of your stablecoin, how many tokens have been issued and how many have been redeemed? Over the last 12 months, what is the greatest percentage of your stablecoin in circulation at the beginning of a calendar week to be redeemed in the subsequent seven days?

• Briefly characterize the market or operational conditions that would prevent the purchase, exchange, or redemption of your stablecoin, and any other stablecoins on your platform, for US dollars, or for another digital asset. For purposes of answering this question, do not list or describe legal or regulatory limitations currently described in a user agreement or terms of service. For each condition identified, please provide at least one example that occurred in the past 12 months and its duration.

• Please identify any trading platforms that have enhanced capabilities, privileges, or special arrangements with respect to your stablecoin, identifying those features and their basis, e.g., contractual or common control.

• Please describe how customers would be impacted by a sudden loss in the liquidity of one or more stablecoins. Please also summarize any internal reviews or studies your platform has conducted into how adverse events or shocks in stablecoin markets would affect the financial position of your exchange.

• Please summarize any internal reviews or studies your company has conducted about how specific levels of redemptions or exchanges would affect your stablecoin, including its convertibility into US dollars, or would affect the financial position of your company.

• Please identify any criteria you use for evaluating between stablecoins following a forking event. Also describe a fork’s potential effects on liquidity or transactions involving the resulting stablecoins, as well as on customers with positions in affected stablecoins. If a forking event has occurred in a stablecoin trading on your platform within the last 12 months, please discuss what occurred and your exchange’s response.

In a press release announcing the letters, Chairman Sherrod Brown (D-OH) highlighted the potential difficulties consumers and investors may face in understanding how stablecoins work and their potential risks. “I have significant concerns with the non-standardized terms applicable to redemption of particular stablecoins, how those terms differ from traditional assets, and how those terms may not be consistent across digital asset trading platforms,” Chairman Brown wrote to one exchange. The letters request responses by December 3.