The White House has singled out stablecoins for regulations that would be akin to the mandates that banks must follow, according to reports on Friday (Oct. 1).
The Biden administration is expected to prompt Congress to pass legislation for a charter tailored to the cryptocurrency firms that issue stablecoins but could also push those companies to register as financial institutions.
Stablecoins like Tether, Binance and the Circle’s USDC are backed by the U.S. dollar. Some lawmakers have expressed concern that stablecoins could trigger instability if holders are leery of the value of those underlying assets. The moves by the Biden administration are expected to allay fears that the digital currency could cause financial upset.
The recommendations from the White House will likely be part of a report later this month by the President’s Working Group on Financial Markets (PWG), a Treasury Department committee. The group includes Treasury Secretary Janet Yellen, Federal Reserve Chairman Jerome Powell and Securities and Exchange Commission Chairman Gary Gensler, and was established to “enhance the integrity, efficiency, orderliness and competitiveness of U.S. financial markets.”
It’s anticipated that the PWG will advise the Financial Stability Oversight Council (FSOC) to weigh in regarding the urgency of prioritizing stablecoin activities. That committee, however, isn’t the way that the Biden administration was looking to for answers.
If Congress doesn’t impose a regulatory framework for stablecoins, the White House could be forced to rely on the FSOC.
Stablecoins work on the same blockchain technology where bitcoin and other similar digital currency assets are bought and sold. Stablecoins make up about $110 billion of the market, up from about $11 billion last year. The cryptocurrency market as a whole is worth some $2 trillion.
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The Federal Reserve is looking to develop a blueprint for the future of money and may seek comments in the future on whether it should create its own digital coin.