The Biden administration has asked Congress to take further steps to regulate stablecoins.
The report has been issued today Monday where the Treasury Department wishes to monitor the crypto market.
The Biden government has asked Congress to pass new regulations on stablecoins that have skyrocketed their popularity in recent years. In a report released Monday, the Treasury Department and other regulatory bodies have requested stablecoins be subjected to strict regulations.
This high-level working group has commented that companies that issue stablecoins must be regulated and have rules similar to banks. This report has included Gary Gensler, Chairman of the Securities and Exchange Commission, Federal Reserve Chairman Jerome Powell, and Secretary Janet Yellen.
This announcement requires that companies responsible for such currencies register with a state or a federal banking regulator. But the report argues that stablecoin investors should have protected holdings that would be like deposit insurance.
In addition, it indicates that companies must maintain adequate capital and have sufficient liquidity to fulfill their obligations.
New regulations for companies that issue stablecoins
Stablecoins belong to cryptocurrencies, but unlike Bitcoin and other virtual currencies, the value of so-called stablecoins is linked to metals such as gold and currencies such as the dollar.
The report also indicates these cryptocurrencies can be an excellent option for making payments more efficient and faster if they are well designed and comply with regulations. They can be an alternative to provide more inclusive payment options and improve the user experience.
However, the report indicates that such cryptocurrencies can present serious risks to investors and that regulators must address them to minimize these risks.
Stable cryptocurrencies for faster payments
The so-called stablecoin digital currencies work to facilitate investors’ crypto operations. For many experts, these stable cryptocurrencies will become the most used by consumers and can be used for everyday payments due to their simplicity and speed.
The circulation of such stablecoins has skyrocketed considerably, rising from $29 billion at the beginning of this year to more than $133 billion in recent weeks. Many critics have commented that if there is no stricter regulation, a bank run can occur and be a big financial problem.
Biden administration has also recommended that a subcommittee of regulators examines the stablecoins risk and what could happen to the banking system if they are not properly regulated. They indicate that if these currencies become an imminent threat, this subcommittee would have the tools to act and import the regulations.