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The US Treasury Department recently called Congress to bring stablecoin issuers under the same regulatory bracket as that for traditional banks and financial institutions.
The rapid rise of the stablecoin market is forcing lawmakers to get into action. The regulators have expressed strong concerns over the impact of stablecoin use on the US financial system. Stablecoins are digital assets with their value tied to traditional currencies or fiat. The US Treasury Department has recently dialed Congress to introduce regulatory rules for stablecoins issuers.
The Treasury has recently submitted a recommendation report to Congress demanding that stablecoin issuers should follow the same regulations as applicable to traditional banks and financial institutions.
This comes as stablecoin circulation multiplies by more than 4x since the beginning of the year. But regulators currently see them as highly unregulated at the federal level. As a result, they find that stabelcoins can have a negative impact on the country’s financial system.
“The use of stablecoins presents a number of public policy challenges with respect to protecting investors. Further, stablecoins may facilitate those seeking to sidestep a host of public policy goals connected to our traditional banking and financial system: anti-money laundering, tax compliance, sanctions, and other safeguards against illicit activity.”
Treasury Secretary Janet Yellen has also said that stablecoins are currently at a critical level. However, with appropriate oversight, stablecoins can play a supporting role in the country’s payments system.
Regulating Stablecoins on the Federal Level by Congress
The President’s Working Group on Financial Markets said that regulating stablecoins could be better for the overall financial ecosystem. The Working Group added that regulated stablecoins could “support faster, more efficient, and more inclusive payments options”, the report further adds:
Moreover, the transition to broader use of stablecoins as a means of payment could occur rapidly due to network effects or relationships between stablecoins and existing user bases or platforms.
The chairperson of the Senate Banking Committee, Senator Sherrod Brown, also backed the report. The Senator said that regulation is the key to protecting consumers and investors.
“We must work to ensure that any new financial technologies are subject to all of the laws and regulations that protect investors, consumers and markets, and that they compete on a level playing field with traditional financial institutions,” added he.
All the administration officials said that the discussions are still in the early stages.