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US government calls for law to regulate stablecoins

The US government is calling for a law to regulate stablecoins. Stablecoins are cryptocurrencies whose value is based on real currencies, precious metals or other assets and can be exchanged accordingly. So far it is not certain that the issuers actually have the necessary assets to be able to withdraw their stablecoins.

A report by several US federal agencies on stablecoins now warns of risks and calls on the US parliament to take action. A regulatory framework would therefore strengthen trust in cryptocurrencies for payment purposes. “If well designed and properly regulated, stablecoins could support faster, more efficient and more comprehensive payment options,” the report said.

What is desired is a law with rules for stablecoins and their issuance, which could be withheld from banks, for example: “The rapid growth of stablecoins increases the urgency of this work. If we do not act, we risk the growth of stablecoins without adequate protection for the users The financial system and the economy in general, “the warning said. Stablecoins have not always proven to be as secure as the companies claim.

Should parliament fail to pass a law, the report suggests that the regulator, the Financial Stability Oversight Council, could step in and classify stablecoins as a systemically important risk. On this basis, the US Federal Reserve could then draw up stablecoin regulations.

The US government has recently shown increased interest in controlling cryptocurrencies. For example, US Treasury Secretary Janet Yellen brought Bitcoin regulation into play in January. A separate Federal Reserve report on digital currencies is expected to appear shortly.

While stablecoins make up only a small fraction of the $ 2 trillion-plus digital asset market, their rapid growth has caught the attention of regulators. Market observers estimate that the total value of the stablecoins in circulation has exploded from $ 28 billion at the beginning of the year to more than 130 billion. The best-known issuers are Tether (USDT), Circle (USDC) and Binance (BUSD).

At the end of July, it became known that US federal attorneys were investigating Tether executives for possible bank fraud. An indictment could shake the stablecoin market. In addition, there is the allegation that Tether spent many more units of its cryptocurrency USDT than it earned US dollars. 1 USDT should always be worth 1 US dollar.

Tether refuses to disclose its backup files. With 70 billion USDT spent, at least 70 billion dollars would have to be invested somewhere – but no one has come out as a recipient of the Tether billions. Financial analyst Hindenburg Research suspects a bluff and has a million dollars for evidence of actual tether reserves.

Lawsuits filed by cryptocurrency investors in October 2019 allege that Tether is being used to manipulate the price of Bitcoin. According to this, USDT would be issued with no US dollar coverage and then used to buy bitcoins on platforms like Bitfinex. Should the allegations prove to be true, this could permanently shake confidence in Bitcoin and the cryptocurrency market.

(akn)

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