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Treasury Secretary Janet Yellen will summon top U.S. financial market and banking regulators on Monday to discuss rules for so-called stablecoins, a key part of the cryptocurrency market where government officials are increasingly concerned lack of supervision.
The president’s financial markets task force meeting “will discuss interagency work on stablecoins,” the Treasury Department said in a statement on Friday. In addition to the Secretary of the Treasury, the task force is made up of the heads of the Federal Reserve, the Securities and Exchange Commission, and the Commodity Futures Trading Commission, and this session will also include two banking regulators: the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation.
“Bringing the regulators together will allow us to assess the potential benefits of stablecoins while mitigating the risks they could pose to users, markets or the financial system,” Yellen said in the statement. “With the rapid growth of digital assets, it is important that agencies work together to regulate this industry and develop any recommendations for new authorities. “
The task force “will review current stablecoin regulations, identify risks and develop recommendations to address those risks” and expects to “issue written recommendations in the coming months,” the Treasury said.
Regulators are increasingly worried about this new type of cryptocurrency, which has a fixed price and is backed by real money reserves, due to the risks it poses to investors and the financial system in the process. general. Lawmakers and Fed and administration officials have expressed concern in public and private that some consumers would not be truly protected if one of the companies did not have the backing they claim to have. .
They also say that the growing size of stablecoins has created a situation in which huge amounts of equivalent U.S. dollar coins are traded without touching the U.S. banking system, potentially blinding regulators to illicit financing.
The market value of US dollar-backed stablecoins has grown rapidly over the past year and topped $ 100 billion in May. The larger one, called Tether, has come under scrutiny from regulators for not always having the backing it claims to have.
Powell Warning
The scheduled meeting follows comments by Fed Chairman Jerome Powell this week warning that Stablecoins lack the necessary regulatory oversight.
“They’re like money market funds, they’re like bank deposits, and they’re growing incredibly fast but without proper regulation,” Powell said in answering questions before the Senate Banking Committee on Thursday. “And if we’re going to have something that looks like a money market fund or a bank deposit or a narrow bank that grows really quickly, we really should have the proper regulation. And today we don’t.
Fed officials, including Boston Fed Chairman Eric Rosengren, have pointed to the potential growing risks with stablecoins, including Tether.
In December, the government warned the companies behind stablecoins to strengthen protections against money laundering. The Treasury and other agencies said at the time that they should be used in a way “to effectively manage risk and maintain the stability of the US domestic and international financial and monetary systems.”
There is also the question of whether Congress should step in and write new laws that would give regulators more power to regulate cryptocurrencies. A bill introduced in Congress last year would require stablecoin issuers to have a banking charter and obtain approval from the Fed, among other agencies.
Closely related to the concept of a stablecoin is the difficult decision the Fed faces on whether or not to launch a digital currency. Powell suggested this week that the best-case scenario for a digital dollar run by the Fed would involve Congress issuing a legislative directive rather than letting regulators choose existing “ambiguous law” to safeguard any future movement.
The Fed has previously worked on a digital currency report that Powell says could be released as early as September. Among other things, this document will include a discussion of the risks and benefits of stablecoins, he said.
In recent years, the OCC has established itself as the most aggressive banking agency when it comes to preparing the financial system for the influx of cryptocurrencies. Former acting director of the agency, Brian Brooks, a choice of the Trump administration, has taken a series of swift steps to accelerate digital currencies in the U.S. banking industry. But Brooks left and took a job as the head of cryptocurrency exchange Binance.US, and OCC’s work is expected to slow under the guidance of Michael Hsu, the agency’s current temporary head.
– With the help of Christopher Condon
(Updates to include Congressional review, Fed efforts beginning in fifth paragraph.)
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