The US crypto regulatory framework is fast-evolving, and stablecoins have recently been at the centre of discussions by US policymakers. The US Treasury is reportedly working on a policy framework revolving around the use of stablecoins.
A recent publication by Bloomberg cited officials who were close to the matter, stating that the policy framework will be implemented in the coming weeks. The main agenda in this policy framework will be investor protection.
These sources also revealed concerns about how crypto assets posed a risk to financial stability, and there was the risk of the fast-growing adoption of several stablecoins.
Evolving Regulatory Framework
The Financial Stability Oversight Council is preparing a report that assesses all the perils of stablecoins on the economy. The council’s focus will be on stablecoin transactions and whether these assets are affected by market conditions.
News of these regulations to come has sparked mixed reactions in the crypto community, given that it comes a few weeks after Congress passed a controversial bipartisan infrastructure bill. The bill failed to define a crypto ‘broker’, with the broad definition also including people and businesses that do not deal in crypto transactions.
Once the report is ready, it will be submitted to the President’s Working Group that deals in Financial Markets. Some of the notable people in this Working Group include Federal Reserve Chair Jerome Powell, Treasury Secretary Janet Yellen, and the Securities and Exchange Commission Chair, Gary Gensler.
In July, Yellen had stated that stablecoins needed closer supervision and said there was urgency in regulating these crypto assets. Her sentiments were later supported by the SEC Chair, who stated that regulators needed to protect investors from fraud.
The Acting Comptroller of the Currency, Michael Hsu, also stated that regulators were assessing commercial papers linked to Tether. The papers would help prove whether one USDT is equivalent to one US dollar. Tether states that the US dollar fully backs USDT token reserves. However, an independent assessment of the same is yet to be done.
Growth of Stablecoins
Stablecoins have enjoyed phenomenal growth and adoption over the years. With stablecoin developers stating that their values are backed by the US dollar, most trading pairs on crypto exchanges are usually made with these coins.
Tether is the largest stablecoin and currently has a supply of around 69.4 billion. Since the start of the year, USDT’s supply has increased by 232%. USDC comes in as the second-largest stablecoin. The stablecoin was developed by Circle, and its supply stands at 29.3 billion coins, representing a 651% growth this year.