Home News US Treasury official beckons new stablecoin regulations

US Treasury official beckons new stablecoin regulations

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On Dec. 17, the US Treasury hinted at new stablecoin legislation. With statements about investors’ ‘potentially large risk’ when utilising stablecoins, Nellie Liang, the Under Secretary of the Treasury for Domestic Finance, fanned additional stablecoin regulatory speculation.

In response to the Financial Stability Supervision Council’s study on stablecoins released in November 2021, the US Treasury’s senior financial oversight official stated, “If Congress does not enact legislation, the regulators will try to use what authority they have.”

Besides, stablecoin regulation is impossible without the support of a congressionally designated authority, and the Treasury has limited capabilities. “They can do a bit here and there,” Liang said of regulators’ powers. “However, if these are basic to crypto assets and aren’t reliable, that could potentially be a major risk”.

Stablecoins are the favoured method of entry and exit for leverage users and scalpers. Moreover, Tether (USDT), the world’s largest stablecoin with a market worth of over $75 billion, has been scrutinised numerous times.

Investor runs on stablecoin, according to regulators, might destabilise the system

On the other hand, Moore Cayman, a Cayman Islands-based accounting network, confirmed that Tether Holdings Limited’s USDT stablecoin tokens completely backed by its reserves in its most recent report, published in March of this year. Nonetheless, policymakers are concerned about its broad usage.

Investor runs on stablecoin, according to regulators, might destabilise the system. While the sheer enormity of a market collapse could disrupt existing financial markets. As a result, observers like Mark Cuban predicted that stablecoin regulation would begin in 2021.

Crypto, Congress and the Commission: What’s next for the ‘Wild West’?

Congress and the Treasury Department may be at odds over stablecoin regulation, according to Liang’s remarks. The Financial Stability Oversight Council stated in its November report that if Congress fails to adopt legislation, it is ready to take action on its own to handle stablecoins.

Chairman of the Federal Reserve, Jerome Powell, has made similar remarks. Last Wednesday, he told the Federal Market Open Committee (FOMC) that “If properly regulated, stablecoins can be a valuable, efficient, and consumer-friendly component of the financial system. That isn’t the case right now”.

Congress, on the other hand, still split. Senator Elizabeth Warren of Massachusetts takes a tough stance on the subject. “Stablecoins pose hazards to consumers and the economy”. They’re supporting one of the shadiest aspects of the crypto sector, DeFi. Where customers are the most vulnerable to deception. Before it’s too late, our regulators must get serious about enforcing the law.”

“Interesting new technology”

Senator Pat Toomey of Pennsylvania, on the other hand, hails stablecoins as an “interesting new technology”. That allows for “faster payments, broader access to the payment system, programmability, and more”.

Surprisingly, proponents of Bitcoin (BTC) and cryptocurrencies, in general, would argue that regulating the stablecoin industry would be like closing the stable door after the horse had bolted. Stablecoins are “preferred collateral for bulls”, according to Dylan LeClair, a leading Bitcoin analyst. “It’s good to see,” as the saying goes.

“Stablecoins represent a bridge to a near future,” said Alex Gladstein, the Human Rights Foundation’s chief strategy officer. Where Bitcoin users can peg their holdings to any currency via mobile apps in a non-custodial, non-KYC fashion outside the banking system. Without the need for altcoins, and with quick global cheap payments”. Stablecoins serve as a stepping stone to wider Bitcoin adoption in this regard.

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