123 Interactions, 4 Today
Treasury officials are investigating the hazards of a large number of consumers withdrawing their stablecoins all at once.
In the midst of the tremendous growth of the stablecoin industry, the US Treasury Department is said to be discussing potential regulation for private stablecoins.
The Treasury conducted several meetings last week to examine the risks of stablecoins for users, markets or the financial system as well as to learn about their benefits and consider potential regulation, Reuters reported on Sept 10.
“The Treasury Department is meeting with a broad range of stakeholders, including consumer advocates, members of Congress and market participants,” Treasury spokesman John Rizzo said.
According to the story, which cites three unnamed persons acquainted with the topic, one of the Treasury’s meetings took place last Friday, with officials questioning the crypto community if stablecoins would require direct monitoring if this sort of cryptocurrency became widely embraced. They also reportedly discussed how regulators should limit risks if a large number of individuals withdraw their stablecoins at once, as well as if major stablecoins should be backed by traditional assets.
Previously, Treasury officials met with a group of banks and credit unions to discuss potential stablecoin regulation. One Reuters source said that the officials were collecting information and did not share their thinking on how stablecoins should be regulated.
The Treasury’s increased attention to the stablecoin market follows a parabolic surge of stablecoins over the past year. The total market capitalization of major stablecoins like Tether (USDT) and USDC Coin (USDC) has jumped to more than $125 billion at the time of writing from just around $37 billion in January. Many traditional finance companies, like payment giant MasterCard, have reaffirmed their support for stablecoin-related solutions, with Visa declaring that stablecoins are “starting to live up to the promise of digital fiat.”
The announcement comes after U.S. Senator Elizabeth Warren referred to the cryptocurrency business as the “new shadow bank,” adding that it is “worth considering” prohibiting US banks from keeping reserves to back private stablecoins. Previously, US Treasury Secretary Janet Yellen asked the government to establish a regulatory framework for stablecoins as soon as possible.