U.S. Treasury Secretary Janet Yellen says that the United States needs “to act quickly to ensure there is an appropriate U.S. regulatory framework in place” for stablecoins.
Fast facts
- Yellen made her comments at a Meeting of the President’s Working Group on Financial Markets, held on July 19. According to a readout of the meeting, the group discussed “the rapid growth of stablecoins, potential uses of stablecoins as a means of payment, and potential risks to end-users, the financial system, and national security.” The group expects to issue recommendations on stablecoin regulation in the coming months.
- The group is an inter-agency presidential advisory body chaired by the treasury secretary that includes the chairpersons of the Federal Reserve, the Securities and Exchange Commission, and the Commodity Futures Trading Commission. Jelena McWilliams, chairperson of the Federal Deposit Insurance Corporation and Michael Hsu, acting comptroller of the currency, also joined Monday’s meeting.
- Yellen’s remarks follow those of Federal Reserve Chairman Jerome Powell last week in his semi-annual monetary policy report to Congress, in which he called for stricter regulation of stablecoins and for them to be treated like bank deposits and money market funds.
- Stablecoins — cryptocurrencies designed to minimize volatility by being pegged to a more stable asset — currently have a total market value of more than US$110 billion, according to CoinGecko data. The two biggest stablecoins — Tether and USD Coin — are pegged to the U.S. dollar and have a combined market value of over US$88 billion.
- Growing adoption of cryptocurrencies and decentralized finance has fueled the rise of stablecoins, and regulators around the world have taken notice. China, which is developing its e-CNY, has warned that global stablecoins could bring risks and challenges to international monetary mechanisms and clearing systems. Thailand, another Asian country with capital controls, has warned against the illegal use of Thai baht denominated stablecoins in its policy guidance regarding stablecoins earlier this year.
- Conversely, Asian financial hub Singapore has granted a Major Payment Institution license for e-money issuance to Xfers, a local fintech company that issues XSGD — a stablecoin backed 1:1 by the Singapore dollar — Southeast Asia’s largest stablecoin by market capitalization. Over 1 billion XSGD was transacted on-chain in June, just three months after it crossed its first 100 million, according to Xfers.
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