U.S. Interagency Report: Risks and Recommendations Regarding Stablecoins

The U.S. agency released a report on stablecoins, pointing out potential risks that consumers should be aware of and making recommendations accordingly. Staff at these agencies consulted with key market players, trade association members, experts and advocates. The report sees legislation as the ultimate way out, but suggests a temporary solution.

The Stablecoin's Market Cap Has Hit $133 Billion Now That Regulators Can't Ignore It. Based on this, a coalition of relevant institutions racked their brains to chart a path for the ever-growing stablecoins.

The 26-page interagency report published by the Treasury Department, along with other regulators, highlighted the importance of stablecoins in the ecosystem. In its report, the group known as the President’s Task Force on Financial Markets stated that “stablecoins are primarily used to facilitate transactions, financing, and lending” of other digital assets.

The current market cap of stablecoins is about $133 billion, the largest of which is Tether’s USDT, which has a market cap of $70 billion. This number has grown by 500% in the past 12 months, and their adoption continues to soar as DeFi and digital asset trading continue to soar.

At the same time, the report acknowledges that stablecoins have inherent risks, including “the impact of SEC and CFTC jurisdiction.” The composition of stablecoins may include securities, commodities and derivatives, causing some confusion as regulatory lines blur. Other risks identified include loss of value from stablecoin operations and payment system risks. Operational risks arising from "deficiencies in information systems or internal processes, human error, management failures or interruptions by external events".

The report highlights three policy issues that could arise as stablecoins scale. One is the problem of the obvious systemic risk to the economy caused by the collapse of entities, and the other is the problem of "excessive concentration of economic power". The third is the possible anti-competitive effects of expanding operations.

Several recommendations were made in the report in an attempt to reduce the risks of using stablecoins. The recommendations include comprehensive legislation, interim measures and increased cooperation with international financial organizations.

The report states: "To address these gaps, the stablecoin space needs a coherent and comprehensive regulatory framework that promotes transparency on key aspects of stablecoins and ensures that stablecoins function both in normal times and in conditions of market stress。”

It also urges Congress to take immediate action "to ensure that payment stablecoins are subject to appropriate federal oversight on a consistent and comprehensive basis." In the absence of action by Congress, the interim measure would allow the agencies to increase coordination and cooperation on issues in which they share common interests.

The original text comes from zycrypto, compiled and organized by Blockchain Knight, the English copyright belongs to the original author, please contact the editor for Chinese reprint.

The original text comes from zycrypto, compiled and organized by Blockchain Knight, the English copyright belongs to the original author, please contact the editor for Chinese reprint.