Stablecoins like Circle Internet Financial’s Tether (USDT / USD) and USD Coin (USDC / USD) could see bank-like regulations imposed by US President Joe Biden and his administration, sources told The Wall Street Journal. Specifically, stablecoin operators could be forced to register as a bank.
Alleviate financial panic
Sources close to the matter told WSJ that the White House is taking steps to ease concerns that stablecoins could trigger a financial panic. Stablecoins refers to digital currencies that are backed by safe assets but are based on blockchain technology.
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The logic behind the new regulation is based on the notion that stablecoins could create financial instability if its user base doubts the value of the underlying assets. Securities and Exchange Commission Chairman Gary Gensler has already made his views on stablecoins clear. He said at the end of September:
We have many casinos here in the Wild West, and the poker chip is these stablecoins on the casino gaming tables.
Stablecoin regulation has some support on both sides of the aisle. Congresswoman Cynthia Lummis (R., Wyoming) said in a speech this week that stablecoins should be regulated. She said:
It may be the case that stablecoins are only issued by depository institutions.
What’s next for stablecoins?
Biden is likely to task Congress with introducing new legislation to create a special purpose charter. This would adapt the new regulations to the business models of stablecoin operators.
Additionally, the US Treasury is forming a group to assess whether stablecoin activities are considered systemically important. The findings will be delivered to the Financial Stability Supervisory Board.
The report could be released in a few weeks when the President’s Task Force on Financial Markets is released in late October, according to WSJ sources. It is not clear how the recommendations could be applied.
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