The lack of a primary concern regarding crypto has Washington in a pickle and the closest they can get to agreement is that stablecoins should be stable. With that consensus under their belt, the argument turns to how:
“The Biden administration is asking lawmakers to pass legislation that would treat stablecoin issuers like banks, a step that Republicans and some Democrats oppose in favor of a lighter statutory touch. Other Democrats are skeptical of compromising with Republicans on the issue at all, instead pushing the Biden administration to take more aggressive steps itself.
How—and if—Congress resolves the debate over the roughly $185 billion stablecoin market is an early test of whether Washington will ultimately write new laws or wield existing frameworks to regulate the broader $2 trillion cryptocurrency industry.
“This is a relatively narrow segment of the crypto universe and it would be very constructive if we provided some regulatory certainty and clarity,” said Sen. Pat Toomey (R., Pa.), the top Republican on the Senate Banking Committee, who last week released a draft bill on the issue. “Stablecoins are the logical place to start and the place where there’s the most interest in starting.”
While policy makers say they want to craft rules that could support stablecoins’ wider adoption, they worry about their meteoric growth. The reserve assets of the largest stablecoin, Tether, have been the subject of multiple investigations, with the Commodity Futures Trading Commission last year accusing it of misrepresenting that its dollar reserves were equivalent to its coins. Tether Ltd. agreed to pay a $41 million settlement but didn’t admit any wrongdoing in the case.”
Stablecoins are a more visible target for legislation because they should be pegged to the dollar using dollar reserves. That means a run on the stablecoin will impact the US Dollar itself and that is worrisome.
Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group
