“Focus on” stablecoin U.S. crypto regulatory storm is about to hit

According to people familiar with the matter, the Federal Deposit Insurance Corporation (FDIC), the major US banking regulator, is studying whether certain stablecoins are eligible for its underwriting. If the bank holding the collateral fails, this insurance will provide the token holders with up to $250,000 in loss insurance.

An insider said: “ This is all part of their attempt to introduce stablecoins into the banking system in a responsible manner. It depends on the factors that support stablecoins. If it is backed by the Fed’s cash reserves, then you can Think of it as a deposit. If it is backed by U.S. Treasury bonds, I think it’s difficult for you to regard it as a deposit.”

Todd Phillips, a former FDIC lawyer and current director of financial regulation and corporate governance at the Center For American Progress think tank in Washington, said: “The FDIC may be studying whether stablecoins can be counted as deposits, or whether someone’s ownership of stablecoins is stable. Currency issuers’ deposits.”

Typically, these companies identify their customers when depositing cash in stablecoins or exchanging tokens for cash. However, since stablecoins run on an open public blockchain network (usually Ethereum ), theoretically anyone with a crypto wallet that is not blacklisted can receive stablecoins from other wallets and send them To other wallets.

Phillips said: ” One thing to keep in mind is that each person’s insurance is up to $250,000. ” Therefore, stablecoin issuers need to track who is the current holder of their stablecoins and how many stablecoins they own.

He also stated, “Just like the FDIC logo on the bank’s website convinces depositors that the bank is safe, insuring certain stablecoins and allowing the use of the FDIC logo will enable people to clearly know which stablecoins will not lose value within the insurance limit. .”

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According to the “Wall Street Journal” report, the Biden administration is targeting “stable coins” and is beginning to pave the way for strengthening the supervision of cryptocurrencies, which may have a major impact on the future of digital currencies.

People familiar with the matter said that the Biden administration is considering implementing bank-like regulations on cryptocurrency companies that issue stablecoins, including urging these companies to register as banks.

Circle, the issuer of the second largest stablecoin USDC , recently disclosed that the US Securities and Exchange Commission (SEC) issued an investigation subpoena to the company in July.

The Biden administration is also expected to urge Congress to consider legislation to formulate a special purpose charter for such companies suitable for their business model.

Next, the US President’s Working Group on Financial Markets is expected to make recommendations on the regulatory framework for stablecoins. The panel members include Treasury Secretary Janet Yellen, Federal Reserve Chairman Jerome Powell, and US Securities and Exchange Commission Chairman Gary Gensler.

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Senator Cynthia Lummis, who supports encryption, called for regular audits of stablecoin issuers and expressed concern about the lack of transparency in the reserve support of major issuers. Gary Gensler, chairman of the US Securities and Exchange Commission (SEC), suggested that under US law, stablecoins may be classified as securities, thereby subjecting them to more regulatory scrutiny.

Many stablecoin issuers are acquiring or have expressed interest in acquiring regulatory status similar to those of banks. Circle stated in August that it hopes to become a nationwide crypto bank; Paxos and Binance partnered to issue USDP (formerly PAX) and BUSD, and obtained a conditional banking license in April.

These measures are designed to eliminate regulators’ concerns about stablecoins. They worry that stablecoins may cause financial panic, and therefore need to strengthen supervision.

However, both the previous and current regulators are worried that if a large number of investors suddenly rush to exchange, stablecoins are prone to a bank run-like situation, which will force the issuer to sell assets cheaply, which may put pressure on the financial system. .

However, for now, stablecoins are mainly used by investors to buy and sell crypto assets on exchanges such as Coinbase , and they are also used as collateral for derivatives.

Government officials say that if stablecoins are used more widely as fast payment methods for consumers and businesses, they may compete with banks and credit card networks such as Visa Inc. and Mastercard Inc..

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/focus-on-stablecoin-u-s-crypto-regulatory-storm-is-about-to-hit/
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