While China is targeting cryptocurrencies, the US does not stand by and watch. The Biden administration, the Wall Street Journal reveals, is targeting so.called “stablecoin”: he wants to start laying the ground for a stricter regulation of cryptocurrencies that could shape the future of digital money.
Stablecoins are a rapidly growing form of digital currency in the cryptocurrency world. The value of the three biggest – Tether, Circle’s USD Coin e Binance USD – swelled up up to around $ 110 billion from about $ 11 billion a year ago.
For now, stablecoins are mainly used by investorsi to buy and sell cryptocurrencies on exchanges like Coinbase, which process exchanges 24 hours a day and are designed to combine the stability of national currencies like the dollar with the ability to quickly trade online like bitcoin.
Issuers argue that because stablecoins are backed by safe assets like Treasuries, they should maintain a close link with the dollar and be easily redeemed in dollars. But this contrasts with other cryptocurrencies such as bitcoin which are not backed by assets and can fluctuate in value. Already next week, the Federal Reserve is expected to publish a document which some officials have informally described as a “future of money” project, including stablecoins.
US administration officials also await it, which, explains the WSJ, suspect that if virtual currencies begin to spread more and more as a quick means of payment for consumers and businesses, this would put them in competition with banks, for example.
THE WORK OF THE PRESIDENT’S GROUP
Precisely in light of these concerns, they are then considering whether to require issuers of stablecoin capital and liquidity requirements similar to those required of banks and they are also considering whether to regulate them as money market funds, which are subject to strict limits on the types of short.term assets they can invest in.
In fact, if a “rush to the bank“, that is, if a large number of investors suddenly rushed to redeem stablecoins, an asset sale could occur and some mutual funds would be under stress, as during the 2008 financial crisis. As he explains to the WSJSheila Bair, former head of Federal Deposit Insurance Corp., if a stablecoin issuer has no capital and its reserves fluctuate in value, “this inherently creates a risk of running “. This is why “having strict rules that require investments in assets that are stable, true equivalent of money, is the best way to deal with instability”.
So far, startups issuing stablecoins invest in assets that make them sizable players in capital markets. But there are no clear rules on how these activities should be managed to ensure their stability.
STABLECOIN ARE “THE POKER CUT AT THE CASINO ‘”
In more brisk terms, explained the presidente della Securities and Exchange Commission Gary Gensler, “we have a lot of casinos here in the Wild West, and the poker chips are these stablecoins at the casino game tables.” Gensler is also part of thepresident’s working group on financial markets which should issue recommendations for regulating stablecoins. In addition to Gensler, the group includesTreasury Secretary Janet Yellen and Fed Chairman Jerome Powell.
In the coming months, however, a group of banking regulators, including la Fed e l’Office of the Comptroller of the Currency, should consider whether US banks are legally allowed to hold cryptocurrencies on their balance sheets and potentially define a framework for the capital treatment of lenders’ exposures to such instruments.
“Regulatory measures will help determine how financial innovation and technology will be integrated into the banking sector for years to come,” he said. David Portilla, a former Obama.era Treasury member who is now a partner of the law firm Cravath, Swaine and Moore LLP, which represents banks and financial technology firms. At least apparently, it appears that stablecoin issuers in general are looking forward to working with officials to support the transparency and compliance of their business.
Eg Jeremy Allaire, CEO of USD Coin issuer, Circle, commented the attention of the president’s working group as a good thing for stablecoins: “Circle believes that well.regulated digital dollars, built on public blockchains, can play a vital role in making the movement of value faster. safer and less expensive “.