BlackRock Challenges OCC Regulations...Will the 20% Cap Hinder Innovation?

▲ BlackRock, Stablecoin/AI Generated Image

BlackRock has strongly pushed back against the U.S. regulatory authorities' move to limit the proportion of tokenized assets within stablecoin reserve assets to 20%.

Crypto media outlet BeInCrypto reported on May 3 (local time) that BlackRock submitted a 17-page comment letter to the Office of the Comptroller of the Currency (OCC), requesting the abolition of the 20% holding limit for tokenized reserve assets included in the draft of the stablecoin regulation act GENIUS. The comment letter was submitted on the last day of the 60-day public comment period, which began when the OCC published the notice in the Federal Register on March 2. BlackRock made it clear that the risk of reserve assets is determined by credit quality, maturity, and liquidity, not by whether the assets move on a distributed ledger.

In this comment letter, BlackRock criticized the 20% cap as an unnecessary regulation unrelated to the authorities' original purpose. BlackRock's BUIDL assets currently amount to approximately $2.6 billion, supplying over 90% of Ethena's USDtb and Solana (SOL)-based Jupiter JupUSD reserve assets. BlackRock argued that the actual risk profile of an asset stems from the soundness of the asset itself, not from its technological medium, and pointed out that regulatory authorities have a prejudice against tokenization technology.

If the regulation is finalized, BUIDL's ability to expand in the reserve asset market for stablecoin issuers is expected to be significantly limited. Currently, Circle's USYC leads the tokenized asset market with an asset size of $2.9 billion. BlackRock emphasized that in such a competitive landscape, regulations should not become barriers to the growth of specific technologies or products. The comment letter was signed by BlackRock Managing Directors Roland Villacorta and Benjamin Tecmire.

In addition to abolishing the 20% cap, BlackRock also conveyed several additional requirements. First, it urged clarification that Exchange Traded Funds (ETFs) qualify as reserve assets under Section 4 of the law. Specifically, it argued that Treasury bond ETFs, which invest only in eligible assets, should be recognized as reserve assets. It also requested the addition of 2-year U.S. Treasury floating-rate notes, which have their coupon rates reset weekly and thus low price volatility, to the list of eligible assets.

The OCC's 376-page proposal is being developed in conjunction with related regulations from the Federal Deposit Insurance Corporation (FDIC), the Treasury Department, the Financial Crimes Enforcement Network (FinCEN), and the Office of Foreign Assets Control (OFAC). All regulations must be complied with starting January 2027. Separately from BlackRock, the Brookings Institution submitted comments arguing that higher capital costs should be imposed on uninsured deposits held as reserve assets. The speed at which BUIDL establishes itself as a core reserve asset for bank-issued stablecoins will likely depend on how the OCC treats tokenized assets.

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