Treasury officials push for crypto framework
For stablecoins, the push for new regulation appears to be taking on new urgency, raising alarm bells about what could be a systemic risk in financial services.
The latest bursts come from the US Treasury Department.
To that end, and as Bloomberg reported, Nellie Liang, the Under-Secretary of the Treasury for Home Finance, said in an interview: âIf Congress doesn’t enact legislation, regulators will try to use the authority they have â, but they will be left behind. without sufficient supervisory powers.
In other words, there are a few approaches that might ultimately be at work. On the one hand, there could be a uniform framework via Congress, or a bit of a patchwork of different regulations launched into the crypto realm by a range of regulators, without too many proverbial teeth.
In the latter scenario – a multi-faceted approach, with multiple regulators in the mix – Liang said in the report, âthey can do a little here and a little there, but if these are fundamental to crypto assets and what ‘they are not stable, that could potentially be a big risk. She explicitly called for action by Congress.
The interview with Liang comes just over a month after the president’s financial markets task force found both promise and peril with stablecoins. The Group published its findings in collaboration with the Federal Deposit Insurance Corp. (FDIC) and the Office of the Comptroller of the Currency (OCC).
Also read: Stablecoin Risk Mandates Legislation
As for the promise: “If well-designed and properly regulated stable coins could support faster, more efficient and more inclusive payment options.” Additionally, the transition to a wider use of stablecoins as a form of payment could happen quickly due to network effects or the relationships between stablecoins and existing user bases or platforms. “
Promise and peril
As for the peril: The same report warned of the risks of trading ‘speculative’ digital assets, as consumers use stablecoins to switch between online platforms.
Stable coins also pose “illicit financing issues and risks to financial integrity,” according to the report – and repayment protocols, on the whole, have yet to be well defined. That same report recommended that Congress “act quickly” to ensure that there is federal oversight over stable payment coins, which would also be global in scope.
The agencies recommended in the report that “Congress move quickly to ensure that stable payment coins are subject to appropriate federal prudential oversight on a consistent and comprehensive basis.” And as part of a holistic approach, issuers of stablecoins should be required to be insured depositories.
Limiting issuance to regulated entities and within a global framework could dispel any piecemeal approach that would result from a multi-agency approach. For example, the Securities and Exchange Commission (SEC) might focus on âsupportingâ stablecoin assets, or on speculation; other agencies would ostensibly focus on the commercial aspects.
Treasury concerns – echoed by Liang’s interview – highlight why a concentrated effort may be the go-to approach for an emerging industry, at least among regulators themselves.