The U.S. Department of the Treasury is looking into both the risks and benefits of stablecoins, Reuters reported.
Stablecoins are a widely growing cryptocurrency type with values pegged to traditional currencies.
Government leaders have been surprised at how the crypto market has been expanding, according to the report. It exceeded $2 trillion as of April, along with a stablecoin market cap of $125 billion, the report stated, citing statistics from CoinMarketCap.
Regulators in the U.S. have been working on understanding cryptocurrencies, including their risks and opportunities as compared to the usual U.S. financial system. The regulators say they plan to issue numerous reports in the coming months, according to the report.
Treasury Secretary Janet Yellen, speaking in July, said the government didn’t have a lot of time to set up a regulatory framework for stablecoins, the report stated. Treasury officials met this week to discuss the ways stablecoins could be regulated. The department also wants to assess whether major stablecoins could be backed by traditional assets, as well as how they should be structured, how they could be used and whether the current regulatory framework is good enough.
Bloomberg reported that the Treasury Department is also looking at whether stablecoins pose a risk to economic stability.
The department has worked with other agencies to roll out an examination by the Financial Stability Oversight Council, which could see stablecoins with much stricter regulations if the council determines they’re a threat, according to Bloomberg.
Yellen and the group she leads, the President’s Working Group on Financial Markets, have been focused especially on claims by Tether that it has large amounts of commercial paper, or debt issued by commercial companies to meet short-term funding needs, Bloomberg report. The information being gathered is likely to be used to shape a bigger Treasury report on stablecoins.
Meanwhile, buy now, pay later (BNPL) firm Afterpay has urged the Australian government to adopt stablecoins, saying they could help to cut down on merchant fees.