Stablecoins Must Be Controlled - Official Paper Released By Biden Administration.

Stablecoins Must Be Controlled - Official Paper Released By Biden Administration.

2021-11-03 | Big Bob

Stablecoins Must Be Controlled - Official Paper Released By Biden Administration.

According to long-awaited research issued by the Biden administration, stablecoins, a popular sort of digital asset tethered to existing currencies, might revolutionize how Americans pay for everything from mobile phones to fuel to haircuts and cups of coffee. Stablecoins might "enable speedier, more efficient, and more inclusive payments solutions" if they are regulated, according to the President's Working Group on Financial Markets, which comprises some of President Joe Biden's top economic experts. "Moreover," the paper adds, "owing to network effects or links between stablecoins and current user bases or platforms, the move to widespread usage of stablecoins as a means of payment might occur quickly." Nonetheless, Biden's economic advisers believe Congress should act quickly to establish regulatory supervision and a formal market structure to safeguard and inform investors, issuers, and exchanges. The Biden team specifically advised that Congress approve legislation restricting stablecoin issuance to insured banks, giving regulators significantly more control over the business. Senior government officials told CNBC that while their research focuses on vulnerabilities, the country's top regulators believe stablecoins are a viable digital payment alternative that requires significantly greater legislative control. The $130 billion stablecoin industry is cherished in part because of stable coins’ consistent pricing and relationship to sovereign currencies, unlike their volatile crypto siblings. Because of their consistency, they have become a rising source of liquidity in cryptocurrency markets all around the world. Traders and investors use them to purchase and sell other assets, as well as to store capital. Stablecoins, like traditional fiat currencies, serve as a means of trade and a store of value. It also distinguishes them from crypto-assets such as bitcoin, which are frequently viewed as a source of financial appreciation and possible market returns by investors. Stablecoins, like other digital assets, must be managed to ensure they aren't used to fund criminal activity, according to Securities and Exchange Commission Chairman Gary Gensler. Gensler is a member of the President's Financial Markets Working Group. "The usage of stable coins poses a variety of legislative issues in terms of investor protection," he stated. "Furthermore, stablecoins may make it easier for people who want to avoid a variety of public policy goals associated with our traditional banking and financial system, including anti-money laundering, tax compliance, sanctions, and other anti-illicit activity measures." In preparing its report, the administration claimed it met with numerous significant companies in the crypto business, including payment networks Visa, Mastercard, and Square, as well as cryptocurrency exchanges Coinbase, Gemini, and Kraken. The working group was particularly concerned about "prudential" risk. A run on stablecoins, issuers' failure to meet redemption requests, or market concentration are all prudential hazards. "Congress act quickly to adopt legislation to guarantee that payment stablecoins and payment stable coin arrangements are subject to a federal prudential framework on a consistent and comprehensive basis," the report's authors advised. To address these wide issues, the paper recommends that stablecoin supply be limited to insured banks. Government institutions, such as the Federal Deposit Insurance Corp. and the Federal Reserve, would have more authority over stable coin issuers' operations, risk management, and general health if they were classified as banks. Regulators would be able to enforce capital and liquidity requirements to keep financial institutions secure and ensure that coin issuers can fulfill redemption requests. Some, notably Republican Senator Cynthia Lummis of Wyoming, argued that the mandate went too far and would harm small start-up enterprises. "While I agree with many of the suggestions, including the necessity for Congressional legislation and prudential risk management," she stated in prepared remarks, "proposing that only insured depository institutions be permitted to issue a stablecoin is unwise and incorrect." "We should all agree that startups deserve the same opportunities as Wall Street institutions. However, as the paper notes, Congress will have the last word." Officials from the White House also stated that talks with Congress are still in the early stages. While lawmakers on both sides of the aisle are likely to support more regulation, it's unclear whether Democrats in Congress will have any time to spare as they try to pass both a $1 trillion bipartisan infrastructure bill and a $1.75 trillion anti-poverty and climate bill before the end of the year. For months, the White House has recruited the help of its top economic advisers to figure out how to regulate stablecoins and other comparable assets. Biden's working group, which is made up of top regulators entrusted with recognizing financial system vulnerabilities, has provided input to those conversations. Gensler, Treasury Secretary Janet Yellen, Federal Reserve Chairman Jerome Powell, and FDIC Chairman Jelena McWilliams are all regular members. Sen. Sherrod Brown, a Democrat from Ohio who chairs the Senate Banking Committee, praised the proposals of the working group. In a news statement, he added, "Today's Presidential Working Group study emphasizes the hazards that the fast expansion of stable coins poses to families and the economy." "We must endeavor to guarantee that any new financial innovations are subject to all applicable rules and regulations protecting investors, customers, and markets and that they compete on an equal footing with established financial institutions." The relative stability of stable coins, as well as their potential applications, have drawn the attention of lawmakers and banking authorities alike. The Federal Reserve, for example, has been looking at the prospect of a US stablecoin, or central bank digital coin, for months. When asked about the Fed's intentions for a digital currency in the United States in September, Powell agreed that CBDCs had both advantages and disadvantages. "We believe it is critical for the general good that the central bank maintains a stable currency and payment system. That is one of our responsibilities "At the time, Powell stated. The Federal Reserve Bank of Boston, which has led the central bank's stable coin research efforts, stated in August that approving a CBDC would help the United States stay up with nations like China and Sweden. Advocates for Stablecoin and CBDC say that a safe digital currency tethered to the dollar might aid in the delivery of payments to the public in times of crisis and give financial services to underbanked populations. One of Powell's main deputies, Fed governor Lael Brainard, is a vocal backer of the central bank's studies. "Given the dollar's critical role, the Federal Reserve must stay at the forefront of CBDC research and policy development," she stated during the summer. Biden is generally expected to elevate Brainard in the coming weeks, according to Wall Street.

Leave a comment

Your email address will not be published. Required fields are marked *

Top 7 cryptocurrency overview

Best trading tool for cryptocurrency

2022 Top cryptocurrency Price Prediction List