Biden Administration Report: Congress needs to pass stablecoin legislation as soon as possible and restrict issuers from being insured banks


The Biden administration stated that stablecoins are digital assets anchored to traditional currencies, which may change the way Americans pay for everything from mobile phones to haircuts.

The President’s Financial Markets Working Group found that stablecoins can “support faster, more efficient, and more inclusive payment options” if they are regulated.

However, US President Biden’s economic advisers said that Congress should pass legislation restricting the issuance of stablecoins only by insured banks.

A long-awaited report released by the Biden administration shows that stablecoins anchored to traditional currencies are a very popular digital asset, which may change the way Americans pay daily — from mobile phones, gasoline to haircuts. And coffee and everything.

The President’s Financial Markets Working Group (PWG) stated that stablecoins can “support faster, more efficient, and more inclusive payment options” when regulated. The working group includes several senior economic advisers to President Biden.

“In addition,” the report reads, “due to network effects or the relationship between stablecoins and existing user groups or platforms, a shift in the widespread use of stablecoins as a means of payment may occur quickly.”

However, Biden’s economic advisers said that Congress must introduce supervision and formal market structures as soon as possible to protect investors, issuers and exchanges and provide them with relevant information.

Specifically, the Biden team recommended that Congress pass legislation restricting the issuance of stablecoins to insured banks, a move that would give regulators greater jurisdiction over the industry.

Senior government officials told CNBC that their report focuses on risk, but the top US regulator believes that stablecoins provide a convincing digital payment option, but require more supervision by lawmakers.

Unlike cryptocurrencies with greater volatility, the US$130 billion stablecoin market is valued to a large extent due to the stable valuation of stablecoins and the connection with currencies of various countries. This stability makes them a growing source of liquidity in the global cryptocurrency market. They are used by traders and investors to buy and sell other assets, or as a safe place to store wealth.

In this sense, stablecoins are more like a medium of exchange and a store of value for traditional legal tender. This also sets them apart from crypto assets such as Bitcoin , which investors generally view as a source of capital appreciation and potential market returns.

US Securities and Exchange Commission (SEC) Chairman Gary Gensler said in a press release on Monday that, like other digital assets, stablecoins need to be monitored to ensure that they are not funding criminal activities. Gensler is also a member of the President’s Working Group on Financial Markets.

“The use of stablecoins poses a series of public policy challenges in protecting investors,” Gensler said. “In addition, stablecoins may provide for those seeking to evade a series of public policy goals related to our traditional banking and financial system. Convenience. These goals include anti-money laundering, tax compliance, sanctions, and other safeguards against illegal activities.”

The US government stated that when drafting the analysis report, it talked with several key players in the crypto industry, including payment platforms Visa, Mastercard and Square, as well as exchanges Coinbase , Gemini and Kraken.

What the working group is most concerned about is what they call “prudential” risks. This risk includes runs on stablecoins, the issuer’s inability to honor redemption requests, or market concentration.

The authors of the report recommended that “Congress take swift action to enact legislation to ensure that the payment of stablecoins and the payment of stablecoins are compliant with the federal prudential framework on a consistent and comprehensive basis.”

In order to allay these widespread concerns, the report recommends that legislators limit the issuance of stablecoins to insured banks.

The classification of stablecoin issuers as banks will allow government agencies-including the Federal Deposit Insurance Corporation and the Federal Reserve-to have greater jurisdiction over their business, risk management, and a better understanding of the overall health of the industry.

Regulators will be able to implement capital and liquidity standards designed to ensure the safety of financial institutions and ensure that issuers can fulfill their promises to redeem assets.

However, this proposal was particularly opposed by some people, including Senator Cynthia Lummis, Republican of Wyoming. Lummis believes that this requirement is too much and will be detrimental to smaller start-ups.

“I agree with many of these recommendations, including the need for Congressional legislation and prudent risk management, but I do not agree with the proposal that only depository institutions can issue stablecoins.” She said in a prepared speech, “We should all agree. , Startups should have the same opportunities as Wall Street institutions. However, as the report clearly points out, Congress will have the final say.”

Government officials also pointed out that discussions with Congress are still at an early stage.

Although legislators from both parties may be in favor of better regulation, it is unclear whether the Democrats in Congress will be able to spare the time to carry out this work- they still need to pass a $1 trillion bipartisan foundation by the end of the year. Facilities bill and approximately $1.75 trillion in poverty alleviation and climate programs.

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