A Treasury official says stablecoin legislation is ‘urgent.’

According to Treasury Undersecretary for Domestic Finance Nellie Liang, Congress should act quickly to pass legislation that creates regulatory safeguards for the rapidly growing cryptocurrency stablecoin market.

“This is an urgent issue given the rapid growth of this market,” she stated in an interview ahead of Tuesday’s House Financial Services Committee hearing on the President’s Working Group on Financial Markets report, which was released last year. In her written testimony for the hearing, she stated that the market value of stablecoins has exploded to around $175 billion, up from about $5 billion at the start of 2020.

“If legislation is not passed, we harm both innovation and risk,” Liang said in an interview.

According to Liang, the Treasury has been in contact with congressional offices, and a number of them are working on stablecoin proposals. Pennsylvania Senator Pat Toomey, the top Republican on the Senate Banking Committee, has released a blueprint for future legislation. However, it is unclear whether Republicans, such as Toomey, and Democrats will be able to find enough common ground to move a bill forward anytime soon.

The PWG’s stablecoin report noted that the burgeoning asset class has the potential to make payments cheaper and faster, but it also identified a number of potential risks, such as runs on stablecoin issuers if investors lose faith in the asset. Stablecoins are digital currencies that are typically pegged to the US dollar or another fiat currency.

Regulators currently lack the authority to address all of the risks posed by stablecoins, so Congress must step in to fill the “regulatory gaps,” according to Liang. The PWG report made several recommendations, including that lawmakers pass legislation requiring coin issuers to follow bank-like rules by becoming insured depository institutions.

The stablecoin report, compiled by Treasury and other key U.S. financial regulators, is part of a larger government effort to regulate digital assets, according to Liang, who expects the White House to provide more details on an administration-wide strategy in the coming weeks.

As reported by various sources earlier, the Biden administration is preparing to take a more central role in overseeing digital assets, with an executive order expected to be issued as soon as this month.

According to Liang, the broader effort will go beyond financial stability, which is the main focus of the stablecoin report, to investigate issues such as the use of digital assets in illicit finance, financial inclusion, and the importance of US leadership in the global financial system.

 

Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.

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