According to a report by the WSJ, the Biden administration is looking into the possibility of regulating issuers of stablecoins as if they are banks. The administration is also exploring the possibility of asking Congress to come up with legislation that would create a special-purpose charter specifically tailored to these companies.
All the recommendations made by the Biden administration will be included in a treasury-led paper, which is slated for release in October.
Treating Issuers As Banks
Apart from treating stablecoin issuers as banks, the administration will also nudge the firms to register as banks, with the continuous and rapid evolution of the crypto space eliciting significant concern from authorities.
Along with the regulatory strategy, the administration is also considering going to Congress to ask it to propose legislation that would create a special-purpose charter that would be created specifically for these firms. If Congress passes the special-purpose charter, then it would subject stablecoin issuers under federal oversight and not state laws.
Still A Work In Progress
Although the recommendations and proposals are still a work in progress, they will be included in a Treasury-led paper that will be published sometime in late October. The paper is being authored by Treasury Secretary Janet Yellen, Federal Reserve Chairman Jerome Powell, and Securities and Exchange Commission Chairman Gary Gensler. Gensler had recently compared stablecoins to poker chips.
One of the recommendations made by the administration is to have the Financial Stability Oversight Council explore the risks posed by stablecoins to the current financial system. However, according to the WSJ, the administration is leaning towards Congress to act as the Financial Stability Oversight Council can be a little difficult or unwieldy. The Federal Reserve is also set to release its highly anticipated report on the potential digital dollar.
Attracting The Attention Of Regulators
Stablecoins are digital tokens that are often pegged to external assets or currencies such as the US Dollar. Stablecoins make up only a tiny percentage of the $2 trillion digital assets but have attracted attention from regulators thanks to their astonishing growth in a very short amount of time.
Well-known stablecoins such as Tether and Circle have seen a significant increase in valuation, skyrocketing to $110 billion from $11 billion. As a result, they have become a target for regulators who have proposed a slew of strict rules for cryptocurrencies. Securities and Exchange Commission Chairman Gary Gensler has already warned that cryptocurrency investors could potentially get hurt if the crypto space is not given the same protection against fraud and manipulation as present in the banking sector.
On the other hand, Federal Reserve Chairman Jerome Powell told Congress that he believes stablecoins are like money market funds and should be regulated.
“Stablecoins are like money market funds, are like bank deposits, but they’re to some extent outside the regulatory perimeter, and it’s appropriate that they be regulated. Same activity, same regulation.”
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
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