According to the long-awaited report by the Biden administration, stablecoins are a digital asset that is tied to traditional currencies and could change the way Americans buy everything, from cellphones and gasoline to haircuts or cups of coffee.

Stablecoins can be regulated to “support faster and more efficient payments options”, said President Joe Biden’s Working Group on Financial Markets. This group includes many top economists.

According to the report, “Also,” it states, “The transition to more stablecoins could happen quickly due to network effects and relationships between stablecoins with existing user bases or platforms.”

Stablecoins are more valuable than volatile cryptocurrency counterparts because of their stable valuation and their link with national currencies. Their stability has helped them become a source of liquidity on cryptocurrency markets across the world. They can be used to store wealth or to purchase and sell assets.

Stablecoins can be seen as a store of value and a means of exchanging them, much like traditional fiat currencies. This distinguishes them from cryptocurrency securities such as bitcoin which many investors consider a source for capital appreciation or potential market returns.

Biden’s economic advisers stated that Congress should establish regulatory oversight and a formal market structure to protect investors, issuers, and exchanges.

In a press release, Gary Gensler from the Securities and Exchange Commission stated that stablecoins must be monitored like all digital assets to prevent them from being used to finance criminal activities. Gensler is part of the President’s Working Group on Financial Markets.

He said that stablecoins present a variety of challenges to public policy in protecting investors. “Stablecoins can also help people who are trying to achieve a variety of public policy goals that relate to the traditional financial and banking system, including anti-money laundering, tax compliance and sanctions and other protections against illegal activity.

In its analysis of the cryptocurrency industry, the administration stated that it met with key stakeholders, including Square, Visa and Mastercard as well as Coinbase, Gemini, and Kraken exchanges.

They called it “prudential”, and this was a major concern for the working group. These risks could include stablecoin crashes, inability of market participants to redeem redemption requests and run-on stabilitycoins.

These concerns were addressed by the recommendation that legislators limit stablecoin issuing to insured banks.

According to the report, “Congress should act quickly to pass legislation that will ensure payment stabilitycoins are covered by a comprehensive federal prudential framework.”

Classifying stablecoin issuers as banks would give government agencies — including the Federal Deposit Insurance Corp. and the Federal Reserve — greater jurisdiction over their operations, risk management and a better sense of the industry’s overall health.

The regulators would have the power to establish capital and liquidity standards to protect financial institutions and to ensure that issuers can honor redemptions.

CNBC was told by senior officials from the administration that stabilitycoins were viewed as a promising digital payment option. But, Congress has to pass a series of regulations before adoption becomes out of control.

Administration officials acknowledged that the need for legislation was being made, but they noted that negotiations with Capitol Hill were still in their early stages.

While both parties are expected to be in support of more regulation, it’s not clear if the Democrats can spare any time while they attempt to pass their nearly $1.75 billion antipoverty bill as well as their bipartisan infrastructure bill before year’s end.

For months, the White House has engaged its most respected economic advisors to discuss how regulations can be put in place for stablecoins or similar assets.

These talks have been facilitated by input from the panel of high-ranking regulators, who were charged with monitoring and detecting financial system risks. They make up Biden’s working group. Gensler, Treasury Secretary Janet Yellen and Jerome Powell (Federal Reserve Chairman) are regular members. Jelena M. McWilliams is the FDIC Chairperson.

The effort to regulate is motivated in part by lawmakers’ fears that stablecoins — digital currencies pegged to national currencies like the U.S. dollar — could spark financial crises and need better oversight.

Capitol Hill, financial regulators and others have noticed the relative calm and potential use of stablecoins. Fed for instance has spent months studying the possibilities of an American stablecoin or digital central bank coin.

When Powell was asked in September about plans to create a U.S. currency digitally, Powell said that CBDCs have both advantages and disadvantages.

We believe it is vital that the central bank keeps the currency stable and maintains a functioning payments system to the benefit of the general public. Powell stated that it was one of his jobs.

Federal Reserve Bank of Boston has been leading the research effort on stablecoins. In August, it stated that U.S. sanctioning CBDC would allow the country to catch up with nations like China or Sweden.

Stablecoin advocates and CBDC supporters argue that an encrypted digital currency linked to the dollar would help to deliver financial services and payments to those in need.

Fed Governor Lael brainard, who is one of Powell’s top deputies, has been a vocal supporter for the central bank’s research.

“Considering the important role of the dollar it is vital that the Federal Reserve remains at the forefront research and policy-development regarding CBDC,” she stated over the summer. Wall Street expects that President Joe Biden will promote Brainard over the next few weeks.