The need to legislate on stable cryptocurrencies would be urgent

Congress must act quickly to pass legislation that creates regulatory limits for the fast-growing market for cryptocurrencies stable, according to Treasury Undersecretary for Domestic Finance Nellie Liang.

“This is an urgent issue given the rapid growth of this market,” he told Bloomberg in an interview ahead of Tuesday’s House Financial Services Committee hearing on the stablecoin report released last year by the group. President’s Working Paper on Financial Markets. She mentioned in her testimony written for the hearing that the market value of stablecoins skyrocketed to around US$175 billion, from roughly US$5 billion in early 2020.

“If legislation is not passed, we harm innovation and raise risks,” Liang said in the interview.

The Treasury has contacted congressional offices, and several are working on stablecoin proposals, according to Liang. But it’s not clear whether Republicans and Democrats will be able to find enough common ground to push a bill any time soon.

The President’s Task Force Cryptocurrency Report noted that the burgeoning asset class has the potential to make payments cheaper and faster, but also highlighted a number of potential risks, including runs of stablecoin issuers. if investors lose confidence in the asset. Stablecoins are a form of digital currency typically pegged to the US dollar or other fiat currency.

Regulators do not currently have the authority to address all the risks posed by stablecoins, so Congress must step in to close “regulatory loopholes,” Liang said. The task force report offered a number of recommendations, including that lawmakers pass laws to subject cryptocurrency issuers to bank-like rules by requiring them to be insured depository institutions.

The report on stable cryptocurrencies, which was compiled by the Treasury and other key financial regulators from USAis part of a broader government effort to regulate digital assets, Liang said, adding that he anticipates the White House will offer more details on an administration-wide strategy in a few weeks.

Bloomberg previously reported that the Biden Administration is preparing to take a more central role in overseeing digital assets, with the goal of releasing an executive order this month.

That broader effort will expand beyond financial stability, a primary focus of the report on stablecoins, to examine topics such as the use of digital assets in illicit finance, financial inclusion, and the importance of U.S. leadership in the global financial system, Liang said.