Tom Wilson

LONDON, (Reuters) – Asset-backed stablecoins are not a systemic threat to the U.S. Financial System and shouldn’t face a new set, a significant cryptocurrency lobby group informed U.S. regulators Monday. This comes as the U.S. is trying to tighten oversight of this fast-growing technology.

Stablecoins are digital tokens typically backed by dollars, assets or cryptocurrencies. They have exploded during the COVID-19 epidemic.

In light of this, the President’s Working Group on Financial Markets (which includes the Treasury, Federal Reserve and top U.S. regulators) is looking at them in the context of larger efforts to control crypto.

It is expected that the group will publish in the next months a report outlining the potential risks and rewards of stablecoins.

According to the Washington-based Chamber of Digital Commerce, stablecoins that are geared towards retail and pegged at the dollar do not need to be subjected to a set of new rules. This was despite the fact that new technology has been deployed.

It stated that stablecoins “are not at sufficient scale to warrant a separate and compulsory regulatory regime.”

Wall Street banks Goldman Sachs (NYSE 🙂 Inc Group are members of the Chamber. Citigroup Inc (NYSE:), as well crypto companies like Circle, who issue the second-largest stablecoin. The group does not include Hong Kong-incorporated, the biggest stablecoin issuer.

RULES LOOM

Stablecoins, according to proponents, could transform payments. They would avoid the volatility and offer the same benefits of low cost while also being fast. They are used more for crypto trading than payment, and their increasing size has attracted the attention of financial watchdogs.

The current regulation of the cryptocurrency market is not uniform across the world. Stablecoin issuers are not required to have the same level of oversight for their reserves as commercial banks.

According to CoinMarketCap, the value of Tether rose to $69 Billion from $15 Billion a year earlier. The USD Coin also saw a significant increase in value, reaching $33Billion from $2.7B.

This month, global regulators stated that stablecoins will need to adhere to the same protections as traditional rivals in payment processing.

The United States has a variety of rules for stablecoins. Some federal agencies also have oversight.

Janet Yellen, U.S. Treasury Secretary, told regulators that the government needed to act quickly in order to create a regulation framework for stablecoins.

The chamber opposed a new set, but it also demanded that U.S.-regulated stablecoin firms have access to Federal Reserve payment infrastructure.