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Two US lawmakers, Maxine Waters and Patrick McHenry, are working on a bill that imposes bank-like strict regulations on Stablecoin. The Wall Street Journal report July 20th.
Stablecoin issuers are reportedly forced to back up their reserves with conservative assets such as cash and US Treasuries that are not vulnerable to market panic under the proposed law. ..
Congressmen are worried about stablecoin vulnerabilities
US MPs are concerned that stablecoin will be vulnerable to run runs if the issuer’s ability to exchange tokens for US dollars on a one-to-one basis is questioned.
USDT issuer Tether experienced a run on May and had to respect about $ 10 billion in withdrawals in two weeks.
According to the WSJ, this could force stablecoin issuers to liquidate their reserves, which could put further downward pressure on the wider financial industry.
Treasury Secretary Janet Yellen has previously expressed concern that stablecoin needs to be properly regulated to mitigate “current and future risks.”
Stablecoin issuer treated like a bank
The new bill wants stablecoin issuers to be treated like banks rather than money market funds.
US banks are facing stricter regulatory oversight and are required to comply with federal agencies to protect their clients’ funds.
According to the report, stablecoin issuers must comply with federal supervision in addition to capital and liquidity rules.
Meanwhile, the bill also aims to prevent non-financial companies from issuing stablecoins. This is a move aimed at separating financial companies from commercial or technology companies.
Federal Reserve Acting as a Regulator
The report said the bill positions the Federal Reserve as a regulator of “payment stablecoin issuers.”
The Federal Reserve has been favored by the Securities and Exchange Commission (SEC) because of its extensive track record of dealing with financial stability risks.
The Wall Street Journal reported that the Fed has intervened twice in the money fund crisis in the last 12 years.
The report raised concerns that the bill may not support stablecoin transactions and may not provide sufficient regulatory oversight to monitor the platforms on which these transactions occur. I added.
SEC Chief Gary Gensler talked about stablecoin in several interviews and compared it to poker chips.
