Washington (AP) — The Biden administration is calling on Congress to pass a bill to tighten government regulation on stablecoin, a cryptocurrency that has skyrocketed in popularity over the past year.
In a 22-page report issued Monday, the Treasury and several other regulators said the law should require stablecoin issuers to become banks. Measures to prevent money laundering and other illegal activities.
The long-awaited report was produced by an inter-ministerial committee known as the Presidential Working Group on Financial Markets, led by the Treasury, including the Federal Reserve, the Securities and Exchange Commission, and the Commodity Futures Trading Commission.
“Authorities believe there is an urgent need for legislation to comprehensively address the health risks posed by the payment stablecoin arrangement,” the report said.
Until Congress acts, the Working Group will be able to coordinate steps for the Financial Stability Oversight Commission, a broader collection of financial regulators, to protect investors and oversee the reserves of stablecoin issuers. Said.
Howell Jackson, a financial regulation expert at Harvard Law School, said:
Some of these regulators have already taken strict policies, including SEC Chair Gary Gensler, who said stablecoin can be used to circumvent money laundering, tax avoidance, and US financial sanctions.
Stablecoin is a type of cryptocurrency that is fixed at a specific value, usually the dollar or another currency or gold. Unlike well-known cryptocurrencies such as Bitcoin, where prices can fluctuate significantly, stablecoins may be suitable for commerce by keeping the value of each coin at $ 1. Many Bitcoin holders consider it an investment and do not use anything that is highly valued.
There are more than 200 stablecoins worth about $ 130 billion, six times more than a year ago. They are mainly used on cryptocurrency exchanges to buy other digital assets like Bitcoin. Many of those exchanges do not have relationships with banks that allow traders to use cash.
The explosive growth of Stablecoin and the risks it poses to the financial system has rapidly focused government officials on what regulations will be needed. Large banks are also required to follow the same rules as Stablecoin, and even some Stablecoin issuers are demanding clear regulation to bring some order to the industry.
The main concern about coins is that they may not be stable. If a large number of holders of a particular stablecoin decide to redeem them for dollars, they may create a “run” equivalent. Stablecoin issuers usually say they have a $ 1 reserve for every coin to facilitate redemption.
Some issuers say they keep the dollar in cash and short-term government bonds and can quickly convert it to cash. However, some have cash reserves in higher-risk assets, including commercial paper, corporate bonds, municipal bonds, and even short-term business loans known as other cryptocurrencies, the report said.
If the value of these assets plummets (2008 and 2020, as in the previous market meltdown), stablecoin issuers may not be able to maintain a $ 1 peg. It can further fuel panic among investors.
Tether, the largest stablecoin issuer, fines misleading investors from both New York State authorities and the CFTC, claiming that all tokens are backed by dollars and other fiat currencies. I was fined.
There is an extensive web of regulations that manage banks, stock exchanges, and investment funds to protect consumers and avoid market collapse. Treasury officials said Stablecoin primarily broke through these rule gaps.
“If you have something that looks like a money market fund, a bank deposit, or a narrow bank and it’s growing very fast, you need proper regulation,” said Federal Reserve Board Chairman Jerome Powell. Said in the testimony of the Parliament. Year. “And today we don’t.”
Some progressive organizations are opposed to the demands of new legislation as they are subject to lobbying by well-funded companies and industry groups that support the widespread use of stablecoin. Despite the rapid growth of stablecoin, legislation can take a considerable amount of time.
The Working Group’s report represents at least a partial victory for Circle, which issues USD coins, the second most widely used stablecoin, with circulation of approximately $ 33 billion. Circle has announced that it is already in the process of converting to a bank. Circle is backed by Andreesen Horowitz, a venture capital fund that has lobbied extensively in Washington to form stablecoin regulations.
Financial reporting calls for more rigorous monitoring of Stablecoin | WGN Radio 720
Source link Financial reporting calls for more rigorous monitoring of Stablecoin | WGN Radio 720
The post Financial reporting calls for more rigorous monitoring of Stablecoin | WGN Radio 720 appeared first on Illinois News Today.
No comments:
Post a Comment