Read the "Stablecoin Report" released by the Biden administration in one article
Source | Forkast News
Compile | Baize Research Institute
Tensions over stablecoin regulation have been brewing in the U.S. for some time. U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler has long advocated for regulation of stablecoins (which the SEC considers securities) and more regulation of the entire crypto market.
Currently, the Commodity Futures Trading Commission (CFTC) oversees fraud in the crypto derivatives market as well as the underlying spot market. But crypto spot markets still don’t have a federal agency responsible for regulation.
The market value of stablecoins has reached $120 billion this year, and the "Stablecoin Report" released by the President's Financial Market Working Group on Monday may change the status quo of stablecoins.
Treasury Secretary Janet L. Yellen believes that: "Current regulation is inconsistent and fragmented, and some stablecoins actually exceed the scope of regulation."
Currently, stablecoins support transactions in other cryptocurrencies, but in the future they could serve as a broader means of payment. However, she added that a lack of proper regulation creates risks for users and the economy, including the potential for erratic functioning, disrupted payment systems and the concentration of economic power.
The Biden administration's "Stablecoin Report" recommends that Congress legislate to ensure stablecoins are subject to a "consistent and comprehensive" federal framework.“Stablecoins or certain parts of stablecoin arrangements may be securities, commodities, and/or derivatives,” suggesting that the SEC and CFTC may have jurisdiction over stablecoins。
The report urges Congress to subject stablecoin issuers to the same level of regulatory scrutiny and legal obligations as banks.In order to reduce the risk of stablecoin operation, the government proposes to require stablecoin issuers to become "reserved depository institutions"- All other entities will be prohibited from issuing stablecoins. A stablecoin run is similar to a bank run, when customers start withdrawing funds out of fear that their bank (in this case the stablecoin) might fail, only to find out that the stablecoin issuer doesn’t have enough funds to return investors’ funds.
Hypothetically stablecoins can happen because they are not 100% cash-backed - most stablecoins have their reserves only partially backed by cash and the rest by commercial paper.
To address concerns about the stability of stablecoin payments, the report calls for custodial wallet providers to also be regulated. Additionally, all entities performing stablecoin-related functions and activities must meet risk management standards overseen by federal regulators.
To mitigate systemic risks and concentrations of economic power, “legislation should require stablecoin issuers to comply with activity restrictions that limit affiliation with commercial entities”. Regulators should also have the power to set standards that facilitate interoperability between stablecoins. Additionally, Congress should set standards for custodial wallet providers, such as limiting their affiliation with commercial firms and their use of customer transaction data.
While Congress is considering legislation, regulators, including the SEC and CFTC, will use their own capabilities and existing jurisdiction to ensure that stablecoins comply with existing laws and legal obligations.Financial Stability Oversight Board should consider risks highlighted in report before Congress introduces new law。
In addition, in order to prevent stablecoins from being used to finance illicit financial and terrorist activities, the U.S. Treasury Department will continue to encourage countries in the Financial Action Task Force (FATF) to implement international anti-money laundering standards. Just last week, the FATF published updated guidance on virtual assets and virtual asset service providers to guide countries on how to implement their crypto regulations. Stablecoins are virtual assets and should therefore be regulated for anti-money laundering and terrorist financing risks, the FATF report said.
While the scope of the Presidential Task Force’s “Stablecoin Report” is limited to stablecoins, it continues to work with regulators to determine oversight of the entire crypto market.
Matthew Gould, co-founder and CEO of Unstoppable Domains, a blockchain domain name provider that supports stablecoins and other encrypted assets, believes: "This is exactly the type of regulation we expect as part of the encryption industry. Anything that claims to be dollar-backed Anyone with tokens needs to have dollars in a bank, not just any bank, it has to be a U.S. regulated bank.”
“It’s the details that matter, but on the face of it, the proposal makes sense and will likely bring a whole new class of players into the stablecoin space—banks. The U.S. has decided to lean toward the crypto industry, and it looks like they want to give banks a leg up in this space.” development in the field,” he added.
