US Federal Agencies Demand Stablecoin Oversight Powers; Here’s Why
The US Federal agencies have demanded more power to crack down on the stablecoin market as they believe it could potentially destabilize the current financial system. The President’s Working Group along with major financial regulators published a new report on Stablecoins urged Congress to regulate stablecoin issuers similar to banks. The official report read,
“The rapid growth of stablecoins increases the urgency of this work,” the regulators said. “Failure to act risks growth of payment stablecoins without adequate protection for users, the financial system, and the broader economy.”
Regulators shared special concern for stablecoin issuers and the reserves they claim that back the circulating supply of these stable currencies. The stablecoin market has become a $130 billion industry with Tether’s USDT leading the market with over $72 billion in circulation followed by Circle’s USDC with $37 billion in circulation. Federal agencies believe there is no way to verify whether the circulating supply is equally backed without clear regulations in place.
Tether seems to be the biggest cause of worry for the agencies at this point, as the stablecoin issuer has been fined and warned on numerous occasions for its opaque reserves. The firm however claims otherwise and also promised to fully cooperate with federal agencies with the new proposed regulations around the stablecoin industry.
We appreciate the interest from lawmakers on the function, purpose, and security of all stablecoins across the cryptocurrency ecosystem. We have been and are pleased to work with policy makers around the world on these important issues. 1/3— Tether (@Tether_to) November 25, 2021
Will Stablecoin Market Suffer Next After Privacy Coins
The recently passed Infrastructure Bill has already created a lot of panic and fear among crypto businesses due to the extreme and near impossible crypto reporting that it demands. US government’s focus on the stablecoin market was reflected when the StableAct was introduced last year and faced a lot of criticism from the crypto community. Similarly, a Stablecoin risk report was also published at the start of November demanding congress to formulate new regulations around the market.
Privacy coins have been a big cause of worry among European nations which has led to several crypto exchanges delisting them. Now the US government is looking to bring the stablecoin market under the banking laws.Source