An upcoming report from several US government departments including the Treasury indicates that stablecoins will be regulated by the United States Securities and Exchange Commission (SEC).
The Wall Street watchdog gained the powers from a debate between regulators and lawmakers. The decision will move stablecoins into the regulatory remit of the SEC.
The report, expected to be published later this week, is believed to contain a significant power grab from the SEC. Regulatory control of stablecoins such as Tether is an important aspect of cryptocurrency regulation.
There has been a dramatic increase in stablecoin usage in 2021 alone. The total market capitalisation rose from $36.8bn in January to $115.4bn in August, an increase of more than $78bn.
According to those close to the negotiations, the SEC chief Gary Gensler himself sought to gain regulatory control. The report calls for regulation that would see bring stablecoins in line with bank deposits.
The government will take on a proactive role, regulating stablecoins before even ruling on major cryptocurrencies. This action from Gensler is peculiar given his stance had been to leave all crypto regulation off the SEC agenda this year.
This comes on the back of comments Gensler made to The Washington Post in which he said that “stablecoins are acting almost like poker chips at the casino right now”.
The concern over stablecoins has been around for some time. Back in July the Federal Reserve Chairman, Jerome Powell, said that the coins posed a threat to stability due to the unregulated nature of the market.
This proposed regulation would go some way to allay fears that regulators have. However, regulation will still take a long time to get through Congress, delaying these recommendations for some time still.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.