US Treasury Department Releases A Report On Stablecoin Risks

The PWG – President’s Working Group on Financial Markets has released the much-awaited report on stablecoin. The report contains the features and the risk the asst class pose to the financial sector in general.

In the report, it was stated the stablecoins have significantly raised concerns about investor protection as much as the integrity of the market.

Stablecoins have been a trending topic of discussion in the crypto community and among regulators as the total supply of the asset class has increased more than 500% in just a year. The leading token in the stablecoin market, Tether US has seen the highest trading volume over any other token in the market.

The guidance released by the President’s Working Group (PWG) on Financial Markets has called Congress to enact new laws to put a limitation on the issuance of the asset class. This will limit those that can issue the category of cryptocurrency.

Officials from the Treasury have contributed to the discussion in a press briefing that where the problem with stablecoins lies is in identifying the gap in the prudential authority as the category of crypto is known as a multifaceted product with diverse risks.

To curb the risks attached, the officials say that Congress needs to put up legislation. Though, making legislation into an actual law has been slow historically.

In the report, the President’s Working Group advised the regulators to exploit the current authority they have to cover the gaps that are perceived in the structure of the stablecoins. The involved regulators were listed in the report and they include; the Commodity Futures Trading Commission, the Federal Reserve, the Treasury, and the Securities and Exchange Commission. Also, the report requested input from the regulators in the banking system including the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation.

However, more specifically, the report created an emphasis on the input from the CFTC and SEC in regulating the stablecoin market. Ensuring every hand is on deck for the safety of investors as it has to do with the stablecoins, the report recommends that the market risk watchdog, Financial Stability Oversight Council should be onboarded for the proper regulation of the crypto category.

For a few months now, Janet Yellen, the Secretary to the US Treasury has been raising her concerns on stablecoins and also giving the need for the US Government to set up a sustainable regulatory framework.

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