Janet Yellen, the US Treasury Secretary, said on Friday that she would engage with authorities next week to address “interdepartmental collaboration” on stablecoins, a fast-developing class of cryptocurrencies that is attracting legislators’ attention.
On Monday, the President’s Working Group on Financial Markets will speak with the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation to discuss the opportunities and costs of stablecoins, a type of cryptocurrency that is pegged to conventional assets, including fiat currencies like the dollar.
“In light of the rapid growth in digital assets, it is important for the agencies to collaborate on the regulation of this sector and the development of any recommendations for new authorities,” Yellen stated, adding that watchdogs must weigh the positive effects of stablecoins against the dangers they may cause to users, markets, or the financial industry.
As new choices arise and gain popularity, politicians, Federal Reserve officials, and other regulators are paying increasing attention to stablecoins and other digital payment alternatives.
Stablecoins are expanding very quickly, according to Fed Chair Jerome Powell, who also expressed worry about their lack of adequate oversight in congressional hearings in the week.
“If we’re going to have something that looks just like a money-market fund or bank deposit … we really ought to have appropriate regulation and today we don’t,” Powell stated.
In the previous week, US Senator Elizabeth Warren wrote to SEC Chairman Gary Gensler, requesting that he address the threats that the digital currency industry offers to consumers and financial systems.
Also, in the previous month, Boston Fed president Eric Rosengren labeled stablecoins a “misnomer,” saying they can be unpredictable and represent a risk to financial security.
The Federal Reserve is assessing the digital payments ecosystem to see if it might launch a central bank digital currency, or CBDCs.
One of the greatest reasons in favor of a CBDC, according to Powell, is that it would reduce the need for numerous stablecoins or digital currencies, but he stated that the Fed will not be going in that route.