US Treasury pushes for stablecoin regulatory controls

by: Dynasty GI2021-11-08
A much-awaited report by the US Treasury is asking for new laws to tighten controls over the issuing of stablecoins, as it warns about the potential risk this type of cryptocurrency may pose to the financial system.
Stablecoins are cryptos designed to be fully backed by other assets, often global currencies like the US dollar or precious metals like gold.
According to the US Treasury’s working group, ‘stablecoins and stablecoin arrangements raise significant concerns from an investor protection and market integrity perspective’. US Treasury officials are particularly worried about threats of runs on stablecoin reserves and what they see as a lack of transparency when it comes to their reserve holdings – in other words, they fear there isn’t as much clarity on whether stablecoins issued actually have the right amount of fiat currency or precious metal holdings required to back them.

Treasury officials say the US Congress must pass new legislation to regulate the sector and ‘require stablecoin issuers to be insured with depository institutions, which are subject to appropriate supervision and regulation, at the depository institution and holding company level’. The working group’s findings follow calls earlier this year by the US Treasury Secretary, Janet Yellen, for action on stablecoin regulation.

Eduardo Carvalho, the founder and CEO of Dynasty Global Investments AG, commented:
"There is a lot of interest in how stablecoins might be regulated given their claim to be directly backed by other assets like the US dollar. Better regulation may be welcome by players in that crypto segment but it is also important to help consumers know the difference between stablecoins and a crypto like ours, the D¥NS, which has a link to the real estate market but is not pegged to it"

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