Asset manager Van Eck says stablecoins should be treated as investment funds, not banks

 Jan van Eck, CEO of the investment powerhouse VanEck, argued in an op-ed that stablecoins should not be regulated like banks.

Stablecoins should be treated like investment products, not banks, Jan van Eck, the CEO of the investment firm VanEck, wrote in a Barron’s op-ed on Wednesday.

“They don’t lend money, so I don’t understand why there is a push to regulate them like banks. Bank regulation may in fact imply some sort of government guarantee,” he wrote.

Van Eck’s broadside followed just two weeks after the U.S. Undersecretary for Domestic Finance, Nellie Liang, testified before Congress that stablecoins “are bank-like products…as well as an investment-like product, which is why there was a regulatory gap.” A group of regulators called the President’s Working Group for Financial Markets published a report last year recommending that stablecoins fall under the same regulations as banks.

In her testimony, Liang said that technology companies without bank licensing should not offer stablecoins.

Van Eck criticized the Working Group report for not seeing the similarities between stablecoins and money market funds.

“Despite the similarity that stablecoins have with money market funds, the PWG suggested that stablecoin issuers be “insured depository institutions.” Stablecoins invest in securities; they don’t lend like banks do,” van Eck wrote.

He made two recommendations for a potential, stablecoin regulatory framework.

First, he suggested that the SEC oversee stablecoins for a four-year trial period similar to how it considers investment funds under the Investment Company Act of 1940.

Secondly, van Eck recommended not forcing tax withholdings on stablecoins in the future. This measure would give stablecoins an opportunity to prove their value in the U.S. “Most stablecoins currently don’t pay dividends,” he wrote. “We need, however, to imagine a day when stablecoins pay interest and plan technologically and regulatorily for that day.”

Jerald David, the president of asset management firm Arca supports van Eck’s first proposal, saying that “stablecoins on the market today resemble more of a ‘40 Act product than a bank,”

"Adding a wrapper, and creating a Blockchain Transferred Fund would allow for a U.S. dollar proxy that would be welcomed by the banks and large scale financial institutions,” David said.