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- The U.S. Treasury Department has called for stablecoin issuers to be regulated like banks
- A much-anticipated report on stablecoins listed concerns over the unchecked growth of stablecoins
- If regulated however, stablecoins have the potential to revolutionize payment in the U.S.
A much-anticipated report on stablecoins from the U.S. Treasury Department called for stablecoin issuers to be regulated by banks, although their potential to revolutionize payments was also noted. Treasury Secretary Janet Yellen said in the report that oversight of stablecoins was currently “inconsistent and fragmented” with the report itself citing concerns that ranged from the potential for destabilizing ‘bank’ runs to disruptions in the traditional payment system. Swift regulation on stablecoin issuers to bring them into line with banks was recommended, although the transformative power of stablecoins was also noted.
Stablecoins Catch the Limelight
Stablecoins have gone largely under the radar compared to the rest of crypto, aside from Tether’s woes of course, but as the concept of a digital dollar has moved forward, albeit slowly, the market cap of stablecoin issuers has crossed the $100 billion threshold. This means that regulators have no choice but to take action, with the report stating that legislation should be enacted that would require stablecoin issuers to be insured depository institutions in the same way that banks are.
Such a system might be possible for stablecoin issuers like Paxos (PAX) and Circle (USDC) who have made their 1:1 dollar backing evident in frequent reports, but a company like Tether (USDT), for whom dollar backing makes up less than 4% of its $52 billion market cap, obtaining insurance could be tricky.
Report Praises Potential Digital Transformation
The report also called for stablecoin legislation to require custodial wallet providers to be subject to appropriate federal oversight and for stablecoin issuers to comply with activities restrictions that limit affiliation with commercial entities.
The report wasn’t exactly bad news, containing nothing that couldn’t have been anticipated, and in many ways was fairly positive considering the fact that the Tether case has dragged the stablecoin name through the mud recently. It even highlighted the potential that stablecoins have, especially in such a cash-heavy country like the U.S., stating that stablecoins could “support faster, more efficient, and more inclusive payments options”, replacing cash in many instances.