Stablecoins are a great payment alternative. But they must be controlled, a Biden administration report. Stablecoins, a popular sort of digital asset tethered to existing currencies, might alter. The way Americans pay for everything from cell phones and fuel to haircuts and cups of coffee. It is according to a long-awaited research released by the Biden administration.
In the hands of regulators, stablecoins have the potential to “enable speedier, more efficient. And more inclusive payment solutions,” according to the President’s Working Group on Financial Markets. Which includes several senior economic advisors to Vice President Joe Biden.
The research also states that “the shift to greater use of stablecoins as a means of payment. This could occur quickly due to network effects or links between stablecoins. And current user bases or platforms.”
Nonetheless, Biden’s economic experts believe that Congress should pass legislation. Establishing regulatory oversight and a formal market structure as quickly as feasible. In order to safeguard and inform investors, issuers, and stock exchanges alike.
Furthermore, the Biden team advised that Congress pass legislation that limits stablecoin issuance. To insured banks, which would grant regulators significantly greater authority over the business.
Government officials told CNBC that while the administration’s assessment focuses on hazards. The nation’s top regulators believe stablecoins are an attractive digital payment option. That requires significantly greater regulation from legislators.
While the crypto market is turbulent, the $130 billion stablecoin market is cherished in large part. Because stablecoins have a consistent value and are linked directly to national currencies. Unlike their fluctuating crypto counterparts. Because of their consistency. They have become a growing source of liquidity in cryptocurrency markets all around the world.
Stablecoins are a store of value and a means of exchange
In that respect, stablecoins are more like traditional fiat currencies in that they serve. As a means of exchange and a store of value. They are also distinguished from crypto-assets such as bitcoin. Which investors frequently regard as a source of capital appreciation and prospective market returns.
Chairman Gary Gensler of the Securities and Exchange Commission stated in a press release on Monday. That stablecoins, like other digital assets, must closely regulated. To ensure that they not used to finance illicit activity. Gensler serves on the President’s Working Group on Financial Markets, which he co-chairs.
“The usage of stablecoins raises a variety of public policy issues. Particularly in terms of protecting investors,” he explained in his statement. Further, stablecoins may make it easier for people attempting to avoid a variety of public policy objectives. Associated with our traditional banking and financial system, such as anti-money laundering. Tax compliance, penalties, and other safeguards against criminal conduct.
As part of its research, the administration stated that it spoke with a number of significant companies. In the cryptocurrency business. These included payment networks Visa, Mastercard, and Square. As well as cryptocurrency exchanges Coinbase, Gemini, and Kraken.
The working group was particularly concerned about what they referred to as “prudential” risk. Runs on stablecoins, issuers’ failure to execute redemption requests, and market concentration. Are only a few of the hazards associate with cryptocurrencies.
The authors of the research advised that “Congress move swiftly to establish legislation. To ensure that payment stablecoins and payment stablecoin arrangements are subject to a federal prudential framework. On a consistent and comprehensive basis,” according to the paper’s authors.