Michelle Price and Pete Schroeder

WASHINGTON (Reuters), a U.S. Treasury Department-led committee is scheduled to publish a much-anticipated report about stablecoins. These digital coins are a rapidly-growing form of cryptocurrency that can be pegged to traditional currency.

President’s Working Group on Financial Markets is releasing a report on the risk and opportunity presented by stablecoins. They are a market of approximately $131 Billion. The report will open the door to future legislative and possible congressional action.

Politicians are concerned that the private-sector boom in cryptocurrencies may undermine their control over financial and monetary system, raise risks, encourage financial crime, and cause harm to investors. However, it is not clear which financial laws and agencies will apply to these new products.

Janet Yellen from Treasury has stated the government must establish a stablecoin regulatory framework quickly. Monday’s report should help to provide a roadmap and also identify which regulators could be already in place.

Isaac Boltansky was the director of research and policy at brokerage BTIG. He wrote, “In terms the content of the report, expect a fair formulation of the benefits” in a note. 

The President’s Working Group (PWG) has been researching stablecoins for the past few months, including through meetings with a range of financial industry participants, consumer groups and members of Congress, Reuters reported https://www.reuters.com/technology/exclusive-us-treasury-financial-industry-discuss-cryptocurrency-stablecoins-2021-09-10 in September.

These discussions included the possible uses of stablecoins to pay, the risks they pose for users and the financial system, as well as whether certain stablecoins merit direct supervision.

The panel also discussed how regulators can reduce the risk of too many people cashing in their stabilizecoins simultaneously, as well as whether traditional assets should back major stablecoins.

The Treasury, Federal Reserve and Securities and Exchange Commission make up the PWG. But the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency can also be involved.

Although traditional financial companies have repeatedly called for tighter cryptoasset regulations, as they are concerned about their operations, they have also argued that the policymakers need to allow for responsible innovation.

The payments industry is a firm believer in predictability and legal certainty. Accordingly, the PWG is asked to propose a regulation framework which achieves both these goals and protects consumers,” Scott Talbott from the Electronic Transactions Association (Washington), said.