WASHINGTON
\nThe US officials are discussing launching a formal review into whether Tether and other stablecoins threaten financial stability, which could lead to dramatically ramped-up oversight for a fast-growing corner of the crypto market.
\nAfter weeks of deliberations, the Treasury Department and other federal agencies are nearing a decision on whether to launch an examination by the Financial Stability Oversight Council (FSOC), according to Bloomberg sources. FSOC has the power to deem companies or activities a systemic threat to the financial system \u2013 a label that typically sets off tough rules and aggressive monitoring by regulators.
\nSuch a designation would probably be a game-changer for stablecoins, which are considered crucial to the crypto market because traders widely use them to buy Bitcoin and other virtual currencies.
\nStablecoins have thrived in the unregulated shadows, with tokens in circulation now worth more than $120 billion, according to CoinMarketCap.com. And they are increasingly being used for transactions that resemble traditional financial products \u2013 like bank savings accounts \u2013 without offering anywhere near the same level of consumer protections.
\nA hallmark of stablecoins is that they are pegged to fiat currencies, meaning they are supposed to be immune to the wild price swings that have plagued Bitcoin. Tether and other firms achieve that by backing their tokens with assets like US dollars and corporate debt.
\nThe President\u2019s Working Group on Financial Markets, which is led by Treasury Secretary Janet Yellen, has been particularly focused on Tether\u2019s claims that it holds massive amounts of commercial paper \u2013 debt issued by companies to meet their short-term funding needs. In a private meeting US officials held in July, they likened the situation to an unregulated money-market mutual fund that could be susceptible to chaotic investor runs if cryptocurrencies plunge.
\nThe President\u2019s Working Group plans to issue stablecoin recommendations by December and a consensus is building among regulators involved that an FSOC review is warranted, sources said. The groups overlap, as Ms Yellen, Federal Reserve chairman Jerome Powell and Securities and Exchange Commission chairman Gary Gensler are members of both the PWG and oversight council.
\nA Treasury spokesman declined to comment.
\nThe FSOC process includes a lengthy study and an assessment of which federal agencies should respond and how. In the end, the council could direct those agencies to intervene in the market and reduce the dangers posed by stablecoin transactions.
\nWhile Tether is the most popular stablecoin, there are multiple rivals, including Coinbase Global\u2019s USDC token and a dollar-linked offering from Binance Holdings.
\nWatchdogs have also privately expressed worries about Diem, a stablecoin being developed by an association that includes Facebook. A top concern is that the token\u2019s market impact could be massive because of its potential for widespread adoption \u2013 Facebook\u2019s social media network has almost three billion active users.<\/p>\n","protected":false},"excerpt":{"rendered":"
WASHINGTON The US officials are discussing launching a formal review into whether Tether and other stablecoins threaten financial stability, which could lead to dramatically ramped-up oversight for a fast-growing corner of the crypto market. After weeks of deliberations, the Treasury Department and other federal agencies are nearing a decision on whether to launch an examination […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[],"class_list":["post-214922","post","type-post","status-publish","format-standard","category-world"],"yoast_head":"\n