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Biden administration wants to regulate stablecoins

 The US Treasury is urging Congress to pass legislation that would make the issuance of stablecoins tied to banks subject to federal bank laws, a move that would give regulators much greater jurisdiction over the industry.

Biden administration wants to regulate stablecoins

A new report from the President's Working Group on Financial Markets recommends legislation that will protect and address concerns about payment system risks, while addressing additional concerns about systemic risk and the economic focus of power.

A stablecoin is a type of cryptocurrency that is usually backed by a fiat currency such as the US dollar or the euro. It may also be backed by a basket of investments. Stable coins are mainly used as a means of payment. Its value does not fluctuate significantly.

The new report says that the market capitalization of the most popular stablecoins has grown by more than 500 percent over the past year, to reach $127 billion.

“The rapid growth of stablecoins increases the urgency of this work,” the Treasury said in a statement. In the report, the working group identifies some of the risks it says stablecoins can pose to the economy or to individual crypto investors.

A number of scenarios could lead to the deterioration of the stablecoins, as their owners tried to recover them en masse because they are concerned about the viability of the coin.

For example, if the source of the stablecoin does not fulfill its redemption request. Or if users lose confidence in the ability of the issuer of a stablecoin to redeem it, it could degrade it.

Stable Cryptocurrency Offers an Option for Digital Payments

The report said: The decline may spread contagiously from one stable currency to another. or to other types of financial institutions believed to have a similar risk profile. And they could pose risks to the broader financial system.

According to the report, only banks should issue stable currencies. In addition, anyone providing cryptocurrency wallets must be subject to appropriate federal oversight. The report says that failure to act would put many people at risk.

If Congress takes no action, the working group recommended that the Treasury Department's Financial Stability Oversight Board take steps to identify certain stablecoin activities as systemic risks, which could expose them to further federal scrutiny.

In October, the US Commodity Futures Trading Commission fined the issuer of the Tether stablecoin worth $41 million. This is for making misleading statements between June 2016 and February 2019. He falsely claimed that his stablecoins are fully backed by fiat currencies.