The US treasury will give the SEC authority over stablecoins as the President’s working group on financial markets reported. Following the developments, we are going to discuss it some more in our latest cryptocurrency news.
Earlier this year, questions emerged around the growing prominence of Tether and the rest of the stablecoins within the crypto industry. Janet Yellen, the US Treasury Secretary met up with financial regulators with a goal to develop a game plan for regulating these asset classes. It seems that the meeting worked as the US Treasury will give the SEC authority over regulating stablecoins like USDC and Tether and even the CFTC will play a role as well. The powers will be explained in a report that will be released as early as this week.
According to Bloomberg, SEC Chair Gary Gensler lobbied Yellen and other members of the working group to give the country’s top securities regulator more power to set policies for stablecoins and to enforce them. In the draft phases, the report called for Congress to create a separate bank charter for stablecoin issuers whose digital currencies are backed by real-world assets. Given the political divisions, Gensler wanted to clarify that the SEC has existing powers to oversee these tokens when they get involved in transactions. He and the FED chairman Jerome Powell stated that centralized stablecoins are similar to the money market funds and will be regulated as such which would put them under the SEC’s purview.
Tether as the world’s biggest stablecoin has a market cap of over $70 billion and after years of stating that Tether was backed by one US dollar in a bank, the company had to revise all statements in the wake of a new NYAG investigation. The reports show that much of Tesla’s holdings are in the commercial paper which allows the company to earn the yields but they can become riskier during times of financial crisis. USDC on the other hand is worth over $32 billion and about 60% of its holdings were in cash, with the rest of them coming from certificates of deposit, commercial paper, corporate bonds, and Treasury notes. Gensler said he is ready to expand regulations for stablecoins and the Defi markets they enable since the appointment in April. He also said that the expanding asset class could facilitate those seeking to sidestep the host of public policy goals and even impinge on national security.
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