By Pete Schroeder and Michael Price
WASHINGTON (Reuters) – A committee led by the U.S. Treasury Department is set to release a long-awaited report on stablecoins, a rapidly growing type of digital currency pegged to traditional currencies, on Monday, according to an administration official familiar with the matter.
The report from the President’s Working Group on Financial Markets will explore the risks and opportunities presented by the roughly $131 billion stablecoin, paving the way for future regulatory and potential congressional action.
Policymakers are concerned that the private sector-run crypto boom could undermine their control over the financial and monetary systems, increase risk, foster financial crime, and harm investors. However, it remains unclear what financial rules and agencies apply to these relatively new products.
Treasury Secretary Janet Yellen said the government should quickly establish a regulatory framework for stablecoins, and Monday’s report is expected to help provide a blueprint as well as emphasize which regulators may already have jurisdiction.
“In terms of the content of the report, we expect a fair framing of benefits (eg faster/cheaper payments, financial inclusion) with potential disadvantages (eg, risk of operations leading to sale of reserve assets) as well as a number of policy recommendations,” he wrote. Isaac Boltansky, director of policy research at brokerage BTIG, in a note
The President’s Working Group (PWG) has been conducting research on stablecoins over the past few months, including through meetings with a range of financial industry participants, consumer groups and members of Congress, as reported by Reuters https://www.reuters.com/technology/ exclusive -treasury-finance-industry-discussion-digital-stablecoins -2021-09-10 on September.
Those discussions covered the potential uses of stablecoins for payments, their risks for users, the financial system, and whether some stablecoins deserve direct supervision.
They also explored how regulators should try to mitigate the risk of too many people trying to make money from their stablecoins at the same time, and whether major stablecoins should be backed by traditional assets.
The PWG traditionally includes the Treasury, the Federal Reserve, the Securities and Exchange Commission, and the Commodity Futures Trading Commission, but the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency are also involved.
Traditional financial firms have called for stricter rules for crypto assets, which threaten their businesses, but they also said that policymakers should allow responsible innovation.
said Scott Talbot, senior vice president of the Electronic Transactions Association of Washington.
(Reporting by Pete Schroeder and Michael Price; Editing by Paul Simao)