By
Chimamanda U. Martha
April 24th, 2024
Members of Congress are actually making a lot of moves with respect to bringing regulations to the digital currency ecosystem including key areas such as stablecoins.
As the request for functional stablecoin regulation heats up across the board, a US Treasury Official, Nellie Liang has advocated for the introduction of policy guidelines on the unique class of digital assets by the American Congress. The call from Liang, who currently serves as the Under Secretary was further propounded following the claims of ‘potentially big risk’ when using stablecoins.
Liang’s comments also came after the Financial Stability Oversight Council November 2021 report on stablecoins wherein the regulator stated that should “Congress does not enact legislation, the regulators will try to use what authority they have.” The Treasury Department has been relating with players in the digital currency ecosystem based on unclear guidelines, a move that can significantly be changed with comprehensive legislation being introduced by Congress.
The efforts of the Treasury Department or other regulators in exercising oversight on key aspects of the market, including stablecoins, are limited, one that can be strengthened significantly through Congress’ backing.
“They can do a little here and a little there, but if these are foundational to crypto assets and they aren’t stable, that could potentially be a big risk,” Liang stated of regulators’ powers.
Stablecoins currently functions as the fiat currency of the digital currency ecosystem, one many beliefs pose a competition risk to the US Dollar. The majority of stable coins in circulation today are notably backed on a ratio of 1 to 1 with the US Dollar, however, the claims by Tether Holdings Ltd, the company in charge of the largest stablecoin USDT are highly contested. The obscurity surrounding the Tether stablecoin has further led to the risky sentiments that lawmakers like Senator Elizabeth Warren have been echoing in recent times.
“Stablecoins pose risks to consumers & to our economy. They’re propping up one of the shadiest parts of the crypto world, DeFi, where consumers are least protected from getting scammed. Our regulators need to get serious about clamping down before it is too late,” She said in a statement recently.
Stablecoin Regulation: Congressional Divide
Members of Congress are actually making a lot of moves with respect to bringing regulations to the digital currency ecosystem including key areas such as stablecoins. This move is possible as all lawmakers do not share the same sentiments as Senator Warren who is recommending a strict approach for the industry.
Senator Pat Toomey for Pennsylvania is one of the primary names in the legislature that is curious about what the digital currency ecosystem can offer with the right regulations in place. On stablecoins, the senator said it is an;
“Exciting new technology that creates opportunities for faster payments, expanded access to the payment system, programmability, and more.”
Earlier this month, the Chief Executive Officers from six major crypto firms testified before the US House Financial Services Committee. This meeting comes off as a proactive approach towards the regulation of the nascent digital assets ecosystem, a move that will rub off on stablecoins specifically.