The Federal Reserve is actively considering regulatory measures to address the financial stability risks posed by stablecoins issued by non-banks, particularly their potential impact on community banks. Officials highlighted concerns about how these digital assets might contribute to deposit outflows and subsequently limit the lending capacity of smaller institutions. 4 A unified regulatory framework mirroring that of bank-issued stablecoins is being proposed to mitigate risks associated with the unregulated nature of non-bank issuers, a strategy reminiscent of the past money market fund disruptions. The Fed’s Community Depository Institutions Advisory Committee (CDIAC) emphasized this point at an April meeting. The committee’s suggestion for regulatory oversight aligns with Chair Jerome Powell’s emphasis on industry regulation to ensure financial system stability. While stablecoin adoption has surged, comparisons are being drawn to past banking disruptors like money market funds. This underscores the ongoing scrutiny of stablecoins and their potential impact on community banks’ credit distribution, highlighting a significant concern within the industry. The committee recommends regulatory standards for both banks and non-bank stablecoin issuers to prevent arbitrage practices that could undermine financial stability.