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- Treasury Secretary Janet Yellen will meet with key regulators on Monday to talk about stablecoins
- Government officials have expressed concern regarding stablecoins, particularly Tether
- Tether (USDT), a US dollar-pegged stablecoin, is now the third-largest cryptocurrency in terms of market capitalization.
Treasury Secretary Janet Yellen will meet with top financial-market and bank regulators in the United States on Monday to discuss rules for so-called stablecoins, a significant sector of the cryptocurrency industry where government officials are increasingly concerned about a lack of regulation.
President’s group gather to discuss on Stablecoins
The President’s Working Group on Financial Markets will meet on Friday to discuss interagency work on stablecoins, according to a statement from the Treasury Department. The working group includes the heads of the Federal Reserve, Securities and Exchange Commission, and Commodity Futures Trading Commission, as well as two bank regulators, in addition to the Treasury Secretary.
By bringing together authorities, we will be able to examine the potential benefits of stablecoins while minimising the dangers that they may pose to consumers, markets, or the financial system, Yellen said in a statement. Given the rapid rise of digital assets, it is critical that the agencies work together to regulate this industry and establish any recommendations for new authority. The working group will analyse current stablecoin laws, identify concerns, and produce recommendations for resolving such risks, according to the Treasury. Written proposals are expected in the coming months.
Because of the risks it poses to investors and the financial system as a whole, regulators are becoming increasingly concerned about this new type of cryptocurrency, which has a fixed price and is backed by real-money reserves. Some consumers will not be protected if one of the firms does not have the support they claim to have, according to lawmakers and officials from the Federal Reserve and the government, who have raised concern both publicly and privately.
They further claim that the increasing quantity of stablecoins has created a situation in which massive sums of US dollar-equivalent coins are being transferred without ever entering the US financial system, potentially blinding regulators to illegal activity. The market value of stablecoins backed by the US dollar has risen fast in recent months, surpassing $100 billion in May. Tether, the largest, has come under fire from regulators for not always having the support it claimed to have.
The warning given by Powell
The discussion comes as Fed Chair Jerome Powell warned this week that stablecoins lacked the necessary regulatory control. They’re like money funds, they’re like bank deposits, and they’re growing extraordinarily quickly without proper regulation, Powell said in a Senate Banking Committee hearing on Thursday and if they are going to have something that looks like a money market fund, a bank deposit, or a small bank, and it’s growing at a rapid rate, we really have to have adequate regulation, which they don’t have today.
Officials from the Federal Reserve, notably Boston Fed President Eric Rosengren, have raised concerns about the mounting hazards posed by stablecoins like Tether. The government issued a warning to stablecoin companies in December, advising them to beef up their anti-money laundering safeguards. They should be utilised in a way that effectively controls risk and supports the stability of the U.S. domestic and international financial and monetary systems, according to the Treasury and other agencies at the time.
There’s also the question of whether Congress should step in and enact new legislation to give authorities additional power over cryptocurrencies. Stablecoin issuers would need a banking charter and clearance from the Fed, among other institutions, under a plan filed in Congress last year.
The OCC has established itself as the most aggressive banking agency in terms of preparing the financial system for the entry of cryptocurrencies in recent years. Brian Brooks, the agency’s former interim director and a Trump administration appointee, undertook a flurry of efforts to speed up the adoption of digital currencies in U.S. banking. Brooks left to lead the cryptocurrency exchange Binance.US, and Micheal Hsu, the OCC’s current temporary chief, is anticipated to slow down the agency’s activities.
Andrew is a blockchain developer who developed his interest in cryptocurrencies while pursuing his post-graduation major in blockchain development. He is a keen observer of details and shares his passion for writing, along with coding. His backend knowledge about blockchain helps him give a unique perspective to his writing skills, and a reliable craft at explaining the concepts such as blockchain programming, languages and token minting. He also frequently shares technical details and performance indicators of ICOs and IDOs.
