Regulators Ask Congress to Create New Rules for Cryptocurrencies

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Business|Regulators Ask Congress to Create New Rules for Cryptocurrencies

A Treasury Department study says stablecoin issuers should run similar banks to debar destabilizing runs that could erode fiscal stability.

The Treasury Department released a study  connected  Monday that identified regulatory gaps that it said Congress would request   to code  to modulate  stablecoins.
Credit...Stefani Reynolds for The New York Times

Nov. 1, 2021, 3:01 p.m. ET

WASHINGTON — Federal regulators accidental that they urgently request much powerfulness from Congress to decently modulate stablecoins, a fast-growing benignant of cryptocurrency that they pass could effect successful slope runs, user maltreatment and outgo snafus unless lawmakers enactment quickly, according to a study issued Monday by the Treasury Department.

The telephone for legislature enactment comes astatine a pivotal moment, arsenic cryptocurrencies are exploding successful maturation with constricted national oversight successful spot to modulate them.

Stablecoins, which are ostensibly pegged to the worth of a unchangeable reserve plus similar the dollar, person not ever proved arsenic securely backed arsenic companies claim, which the Treasury study warns could airs important problems for customers, investors and the wide fiscal system.

Some regulatory powers already exist, the study said, including the quality of the Securities and Exchange Commission and different national agencies to police certain stablecoin issuers.

But aft months of studying the increasing risks presented by stablecoins, the leaders of the President’s Working Group connected Financial Markets said they had identified regulatory gaps that legislators indispensable address, fundamentally throwing the contented to Congress.

“The accelerated maturation of stablecoins increases the urgency of this work,” says the report, issued by the President’s Working Group, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency.

“Failure to enactment risks maturation of outgo stablecoins without capable extortion for users, the fiscal system, and the broader economy.”

More than $130 cardinal worth of stablecoins are successful circulation, up from $28 cardinal successful January. The cryptocurrencies are issued by a caller breed of fiscal exertion companies similar Tether and Circle. They are not banks, astatine slightest truthful far, and they are not simply tech companies that merchantability online services. They run arsenic some and person fewer rules to usher them.

Regulators made wide Monday that they privation a caller instrumentality that forces these types of issuers to beryllium taxable to requirements similar those of accepted banks and fiscal institutions. Such a designation would necessitate an issuer to person capable reserves to guarantee it could conscionable demands by customers to currency retired quickly, to debar destabilizing runs.

But the moving radical has determined that specified authorization would person to travel from an enactment of Congress and that it could not presently mandate standards for integer payments reliant connected stablecoins. That deficiency of authority, the study said, makes these types of crypto-based transactions much susceptible to “human errors, absorption failures oregon disruptions” that could effect successful consumers losing money, being victims of fraud oregon incapable to entree money.

Federal instrumentality besides cannot present forestall retailers and different commercialized companies from issuing their ain stablecoins, perchance creating risky overlaps betwixt commerce and banking.

“Stablecoins and stablecoin arrangements rise important concerns from an capitalist extortion and marketplace integrity perspective,” the study says.

Matt Phillips contributed reporting.

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