A U.S. Treasury Department-led regulatory body called on Monday for Congress to regulate issuers of “stablecoins” like banks and urged financial agencies to assess whether the role of these fast-growing digital assets in the country’s payments system posed a systemic risk. Reuters reports: The hotly awaited report by the President’s Working Group on Financial Markets will likely boost policymakers’ efforts to put guardrails around stablecoins, a type of digital asset pegged to traditional currencies which the body said could pose threats to the broader financial system. Stablecoins, which include the likes of Tether, USD Coin and Binance USD, have ballooned 500% to reach a market cap of $127 billion over the past 12 months, according to the report. “The rapid growth of stablecoins increases the urgency of this work,” the report stated. “Failure to act risks growth of payment stablecoins without adequate protection for users, the financial system, and the broader economy.”
While stablecoins are primarily used to facilitate trading in other cryptocurrencies, they could become widely used by households and businesses to make payments, the report said. Currently, though, stablecoins have a wide range of policies governing disclosures, what assets are held in reserve to back the coins, and around redemption rights, all of which could make them susceptible to runs if users lose confidence in the asset. “Runs could spread contagiously from one stablecoin to another, or to other types of financial institutions that are believed to have a similar risk profile. Risks to the broader financial system could rapidly increase as well, especially in the absence of prudential standards,” the report warned. Chief among the report’s recommendations is for Congress to “urgently” pass a law that would regulate stablecoin issuers akin to insured depository institutions, subjecting them to strict supervision by banking regulators while also providing some form of government backstop in the event of crises.
Read more of this story at Slashdot.
Source: Slashdot – US Regulators Say Issuers of ‘Stablecoins’ Should Be Policed Like Banks