Stablecoin, often charged as a one-to-one representation of currencies like the dollar, has surged in popularity lately as investors use it to trade other cryptocurrencies. The Biden administration reports that while most of the market value is fixed at the dollar, there are dozens of stablecoins, up about 500% in the 12 months to October.
Both Democrats and Republicans want to be able to quickly redeem one stablecoin for $ 1 while creating new safeguards to avoid broader risks to financial markets. But despite a bipartisan agreement on the need for new federal action on Stablecoin, policymakers continue to argue when and how to do so.
The Biden administration is asking lawmakers to pass a bill dealing with stablecoin issuers like banks. This is a measure that Republicans and some Democrats support and oppose the statutory light touch. Other Democrats are skeptical of compromising on this issue with the Republicans and are urging the Biden administration to take more aggressive steps instead.
How Congress resolves the debate over the $ 185 billion stablecoin market is existing for Washington to eventually create a new law or regulate the broader $ 2 trillion crypto industry. An early test of whether to use the framework of.
“This is a relatively narrow segment of the world of cryptocurrencies and is very constructive if it provides regulatory certainty and clarity,” said Senator Pat Toomey (Pennsylvania), a top Republican member of the Senate Banking Commission. State) said. Last week he published a draft bill on this issue. “Stablecoins is a logical place to get started and the place I’m most interested in getting started.”
Policy makers want to create rules that can support the widespread adoption of Stablecoin, but they are worried about their rapid growth. Tether’s reserve assets, the largest stablecoin, have been the subject of multiple investigations, and last year’s Commodity Futures Trading Commission accused it of misrepresenting a dollar reserve equivalent to a coin. Tether Ltd. agreed to pay a $ 41 million settlement, but did not admit any misconduct in the proceedings.
Last year, the Treasury led a group of financial regulators from across the administration to study Stablecoin, and a surge in Stablecoin redemptions fueled the sale of its reserves, stressing the wider financial system. I warned that I might call. They urged Congress to pass a law requiring the issuance of stablecoin to be limited to regulated entities such as banks.
Treasury Secretary Janet Yellen said in a speech last week about the Biden administration’s approach to digital currencies: “To secure stablecoin to the dollar, most issuers coin with safe and fluid traditional assets. Whenever you want to return Stablecoin to dollars, the company says it has money to exchange, but so far no one will do that to you. We cannot guarantee that. “
Some Capitol Hill lawmakers and representatives of the cryptocurrency industry are resisting the regulations of stablecoin issuers such as banks. Both Toomey and Josh Gotheimer (D., NJ) have drafted legislation to further monitor issuer reserves, but issuers either join bank-like requirements or create for Stablecoin. You can choose whether or not it corresponds to the specified regulatory classification. Toomey’s bill will also allow stablecoin issuers to operate under state rules.
Gottheimer said he deviated from the Biden administration’s request to regulate all stablecoin issuers, such as banks, because of the industry’s desire for feedback and bipartisan support for its efforts. rice field.
“We’ve heard that some people are obviously willing to go to the bank or go to that route, others aren’t, and they want a little more flexibility,” he said. rice field. In the same way. “
The Blockchain Association, an industry group that represents Circle, the most popular stablecoin issuer, wants to allow non-banks to compete with banks for stablecoin issuance.
“It is beneficial to have that competition and bring about that innovation,” said Ron Hammond, director of government affairs at the association.
Treasury officials said they were encouraged by the bipartisan perception of the risks Stablecoin poses and hope to reach an agreement with lawmakers on this issue. Some Democrats are hesitant to work on the law, especially on Stablecoin, and instead support trying to pass a bill that deals with a wide range of cryptocurrency-related regulatory issues.
In the absence of parliamentary action, the Biden administration designates elements of the Stablecoin process as systematically important for financial market stability to the Financial Stability Oversight Commission, a group of financial regulators led by Mr. Yellen. He said he encouraged him to consider that. That step could open the door to tighter scrutiny of the assets that underpin Stablecoin. This is an option preferred by some Democrats over a legislative framework that attracts bipartisan support.
Senator Sherrod Brown (D., Ohio), chairman of the Senate Banking Commission, said the Biden administration should move forward on its own.
“That’s the surest way to go,” he said.
Other Democrats, including Ritchie Torres (D., NY), are progressives who have claimed the benefits that cryptocurrencies can provide to low-income Americans, have passed bills, and regulated some Biden administrations. I want to curb the authorities. Gary Gensler, chairman of the Securities and Exchange Commission, states that stablecoin may be classified as a security.
“The lack of parliamentary action leaves a vacuum of power that regulators like the SEC are trying to fill, and without parliamentary legislation, regulations can vary widely from administration to administration,” Torres said. rice field. It can be very important and should be legislated and regulated on a bipartisan basis as much as possible. “
Last month’s presidential order commissioned a series of research into the cryptocurrency industry, and the Byden administration needs new legislation to improve the government’s treatment of digital assets, including the possibility of creating digital versions of digital assets. The dollar has been appointed to the institution to consider potential areas.
Given that some of these reviews can take months, Congressmen do not expect Congress to take major action on cryptocurrencies until next year. This is a promising possibility for Republicans ready to gain control of the House of Representatives in the fall midterm elections.
“The timeline tells me that this will almost certainly be the case for the next Congress to take action in this area,” said Patrick McHenry, a top Republican member of the House Financial Services Commission, R. North Carolina. ) Said.
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