US Treasury to Release ‘Stablecoin’ Report, Paving the Way for New Rules

The Federal Reserve Building is seen in Washington, United States, on October 20, 2021. REUTERS / Joshua Roberts / File Photo

WASHINGTON, Nov. 1 (Reuters) – A panel led by the U.S. Treasury Department is due to release a much-anticipated report on Monday on stablecoins, a fast-growing type of digital coin attached to traditional currencies, according to an administration official with knowledge the question.

The President’s Financial Markets Task Force report will explore the risks and opportunities offered by stablecoins, a market of approximately $ 131 billion, paving the way for future regulatory and potential action by Congress.

Policymakers fear that the rise of private cryptocurrencies will undermine their control of financial and monetary systems, increase risk, promote financial crime, and harm investors. However, it is not yet clear what financial rules and agencies apply to these relatively new products.

Treasury Secretary Janet Yellen said the government needs to quickly establish a regulatory framework for stablecoins, and Monday’s report should help provide a plan as well as affirm which regulators may already have jurisdiction.

“In terms of the substance of the report, we would expect a fair framing of the benefits (eg faster / cheaper payments, financial inclusion) with potential disadvantages (eg risk of leakage leading to sales reserve assets) as well as a number of policy recommendations, ”wrote Isaac Boltansky, director of policy research for BTIG brokerage, in a memo.

The President’s Task Force (PWG) has been researching stablecoins in recent months, including in meetings with various participants from the financial industry, consumer groups and members of Congress, Reuters reported in September.

These discussions focused on the potential uses of stablecoins for payments, their risks to users and the financial system, and whether any stablecoins merit direct oversight.

They also explored how regulators should try to mitigate the risk of too many people trying to cash in their stablecoins at the same time, and whether major stablecoins should be backed by traditional assets.

The PWG traditionally includes the Treasury, Federal Reserve, Securities and Exchange Commission, and Commodity Futures Trading Commission, but the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency are also involved.

Mainstream financial firms have called for stricter rules for cryptoassets, which threaten their businesses, but also said policymakers should allow responsible innovation.

“The payments industry values ​​predictability and legal certainty. As such, we expect the PWG to recommend a regulatory framework that achieves both of these goals, while encouraging continuous innovation and protecting consumers, ”said Scott Talbott, senior vice president of the Association. electronic transactions in Washington.

Reporting by Pete Schroeder and Michelle Price Editing by Paul Simao

Our Standards: The Thomson Reuters Trust Principles.

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