Stablecoins continue to be under the spotlight in the US as the Working Group on Financial Markets that was convened by the US Treasury has said that there is a need for urgent legislation on stablecoins to ensure that things are brought under check before they spiral out of hand.
Crypto and stablecoins have been under scrutiny for a long from the regulators and the authorities in the US with stablecoins being considered as something that is used to run a parallel economy and this increases the danger and the risk to the financial ecosystem. So far, there has not been much oversight from the authorities on the stablecoins which has led to its quick and massive proliferation not only within the US but across the globe as well but this is seen as a threat by the authorities who would want to control it soon so that it can be regulated and tracked for the long term.
“The absence of appropriate oversight presents risks to users and the broader system,” said Secretary of the Treasury Janet L. Yellen. “Current oversight is inconsistent and fragmented, with some stablecoins effectively falling outside the regulatory perimeter. Treasury and the agencies involved in this report look forward to working with Members of Congress from both parties on this issue. While Congress considers action, regulators will continue to operate within their mandates to address the risks of these assets.”
It is expected that the legislation, if one comes along, would be around the requirement s stablecoin issuers to be insured depository institutions and also ensure that all related parties are under proper regulatory oversight to ensure that this does not turn into a large risk for the users. Right now, there is no such oversight and in the cases of certain stablecoins, there is not even a basis for the peg that they claim to have with certain fiat currencies. This could lead to a dangerous situation where the issuer would not be able to compensate users and would not be able to give them conversion into fiat currencies when there is not enough to back them. It is these kinds of risks that the Treasury would be looking to avoid and for which a proper legislation is needed to bring in a framework for oversight and control of the stablecoins.
