U.S. Treasury Secretary Janet Yellen has joined other federal officials in pushing for regulation of the booming market for stablecoin digital currencies.
At a meeting on Monday, Yellen and other members of the President’s Working Group on Financial Markets discussed the rapid growth of stablecoins, their potential uses as a means of payment, and potential risks to end-users, the financial system, and national security.
“The Secretary underscored the need to act quickly to ensure there is an appropriate U.S. regulatory framework in place,” the Treasury Department said.
Yellen’s concerns echo those of Federal Reserve Chair Jerome Powell, who said last week that stablecoins “are like money funds, they’re like bank deposits and they’re growing incredibly fast but without appropriate regulation.”
“If we’re going to have something that looks just like a money market fund or a bank deposit or a narrow bank and it’s growing really fast, we really ought to have appropriate regulation. And today, we don’t,” he told the Senate Banking Committee.
Stablecoins are cryptocurrencies that attempt to peg their values to a conventional currency, like the U.S. dollar. Crypto startup Circle, which issues the dollar-backed USDC Coin, announced last week it will go public through a merger with a SPAC.
The value of the three largest stablecoins — tether, USD Coin and Binance USD — is about $100 billion, up from about $11 billion a year ago, but as The Wall Street Journal reports, “while [issuers] are responsible for assets that make them sizable players in the traditional capital markets, there are no clear rules about how the assets should be regulated to ensure stability.”
“There are many reasons to think that stablecoins — at least, many of the stablecoins — are not actually particularly stable,” Boston Federal Reserve President Eric Rosengren said in a June speech.
The president’s working group suggested in December that stablecoin issuers should hold “high-quality, U.S.-dollar denominated assets” and hold them at U.S.-regulated entities. According to Treasury, the group “expects to issue recommendations in the coming months.”