Stablecoin report released by key US advisory group

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Key takeaways The President’s Financial Markets Task Force has released its report on Stable Coins. The report calls for broad legislative action to regulate stablecoin issuers, including the adoption of deposit insurance requirements. The authors asserted that some stable coins in the market can be considered securities. Share this article

A much-anticipated report from the President’s Financial Markets Task Force was released today. The report urged swift legislative action to extend federal oversight to the rapidly growing stablecoins market.

PWG urges settlement on Stablecoin

The President’s Financial Markets Task Force (PWG), in conjunction with the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC), released a report on stablecoins recommending that Congress exercise its broad legislative power to regulate the issuance and custody of stablecoins in the United States. The report was released earlier today by the US Department of the Treasury.

The report recommended “that Congress act quickly to enact legislation to ensure that stable payment coins and stable payment coin agreements are subject to a federal prudential framework on a consistent and comprehensive basis.”

In addition to standard AML / CFT concerns, the report identifies three particular risks to the national interest posed by an unregulated stablecoin market: the risk posed by stablecoin runs, the risks associated with the stability of stablecoins as a payment system, and the systemic risk of “concentration of economic power”.

To mitigate the risk of a so-called “stablecoin run” – a hypothetical scenario, named for real-world banking races, in which depositors all attempt to redeem their stablecoins for cash at once only to find that the entity Issuer has enough to cover demand – the report recommends legislation requiring issuers of stablecoins to be “insured depository institutions”, which are subject to “appropriate oversight and regulation”.

To address the second primary concern regarding the stability of stablecoins as a payment system, the report recommends that Congress empower federal authorities to require that “any entity that carries on activities essential to the operation of the stablecoin arrangement complies with appropriate risk management standards. “This would involve submission to federal oversight.

The third main concern listed in the report is the risk of “concentration of economic power,” which the report suggests mitigating by requiring stablecoin issuers “to comply with activity restrictions that limit affiliation with entities. commercial ”.

The report calls for swift action on behalf of Congress, writing:

“The rapid growth of stable coins increases the urgency of this work. Inaction risks increasing the number of stable payment coins without adequate protection for users, the financial system and the economy in general. In contrast, a regulatory framework that supports confidence in payment stablecoins, in normal times and times of stress, could increase the likelihood that stablecoins support beneficial payment options. “

In addition to calling for action from Congress regarding the regulation of stablecoins, the report also states that “agreements and activities regarding stablecoins may involve the jurisdiction of the SEC and / or the CFTC,” writing that:

“Stable coins, or parts of stablecoins agreements, can be securities, commodities and / or derivatives. In addition, much of the trading, lending and borrowing activity currently fueled by stablecoins on digital asset trading platforms and within DeFi may also constitute securities and / or derivatives transactions that must be conducted in accordance with federal securities laws… ”

While urging Congress to deal with stablecoin arrangements, the report warns that in the meantime, these agencies “will continue to use their existing authorities to address these prudential risks to the extent possible.” .

Disclaimer: At the time of writing, the author of this article owned BTC, ETH, and several other cryptocurrencies.

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