 |
| Stable Cryptocurrencies Can Face Difficult Actions |
Due to the relationship with less volatile assets, stablecoins are ostensibly more secure than traditional cryptocurrencies. But US regulators don't seem to believe it.
Bloomberg reported that the Treasury and other federal agencies will conduct a Financial Stability Review Board review to deal a potential blow to stablecoins.
US officials are discussing whether Tether and other stablecoins threaten financial stability and are conducting a formal review that could significantly improve oversight of the rapidly growing segment of the cryptocurrency market.
After several weeks of deliberation, the Ministry of Finance and other federal authorities are due to decide whether or not to review by the Financial Stability Oversight Board.
The Financial Stability Board has the power to designate any company or activity as a systemic threat to the financial system, and this designation is usually specified by regulators to establish strict rules and oversight.
This name could be a turning point for stablecoins, which are vital to the cryptocurrency market as traders are widely used to buy Bitcoin and other virtual currencies.
Stablecoins are booming and the current value of the tokens in circulation is over $120 billion. They are increasingly being used in transactions that are similar to traditional financial products but do not offer the same level of consumer protection.
The specialty of stablecoins is that they are linked to fiat auctions. This means that it should not be affected by price fluctuations affecting Bitcoin.
Tether and other companies do this by backing their tokens with assets such as the US dollar and corporate debt.
Stable Cryptocurrencies Can Face Difficult Actions
The President's Financial Markets Task Force, led by Treasury Secretary Janet Yellen, has pursued Tether's allegations that it holds a significant amount of commercial paper.
At a special meeting of US officials in July. They compare it to mutual funds in unregulated money markets, which can be affected by the chaotic flow of investors when cryptocurrencies go down.
The President's task force plans to publish stable currency recommendations by December. and creating a consensus among relevant regulators that the FSB review is appropriate.
The FSB process includes lengthy reviews and assessments of which federal agencies should respond and how they should respond.
The board of directors can direct these institutions to intervene in the market and reduce the risks of stable transactions.
And Tether is the most stable coin. But there are plenty of competitors, including Coinbase's USDC and Binance's USD-linked products.
With the popularity of stablecoins, criticism intensified. Coinbase made headlines when it was announced that the US had threatened to sue the Securities and Exchange Commission if it launched a product that would allow customers to borrow USDC to other traders for a 4% return.
The US Securities and Exchange Commission considers Coinbase's proposal as an investment agreement that must be registered with the agency. The company strongly opposes this view.
Stablecoins are facing another threat from the US government as the Federal Reserve questions the introduction of its own digital currency.