US legislators in the Biden administration and on Capitol Hill have unanimously voiced their support for tighter regulation towards stablecoins as Washington wraps its head around the rapidly growing cryptocurrency industry.
Stablecoins, whose values are tied to those real-world assets like the dollar has grown roughly 500% in the 12 months ending in October, a report from the Biden administration says. As policymakers push for regulating the sector, they seemed quite wary of stablecoin’s meteoric rise.
This is evident from the Tether case which has come under attack from the Commodity Futures Trading Commission last year for alleged misrepresentation of its dollar reserves. The case settled with Tether Ltd. agreeing to pay $41 million without admitting any malpractice.
Despite their conservative outlook, both Democrats and Republicans have agreed on the need for new federal action on stablecoins, but are at loggerheads about how and when to proceed.
On one hand, the Biden administration wants to treat stablecoin issuers like banks, a move criticized by some Republicans and Democrats who favor a lighter statutory touch. Some lawmakers on Capitol Hill, as well as representatives of the cryptocurrency industry, are opposed to the idea of regulating stablecoin issuers like banks.
Rep. Josh Gottheimer who has overseen legislation that would provide additional oversight of issuers’ reserve assets deviated Biden administration’s request saying, “What we heard is clearly some are willing to become a bank or go that route and others are not and they want a little bit more flexibility,” he said.
US regulatory lingo on stablecoin to persist until next year
The Blockchain Association, an industry group led by Circle, the issuer of one of the most popular stablecoins wants to allow nonbanks to compete with banks in issuing stablecoins. It’s helpful to have that competition, to have that innovation,” said Ron Hammond, the association’s director of government affairs.
In its executive order last month, the Biden administration tasked agencies to improve the government’s handle on digital assets, including the possibility of creating a digital version of the dollar.
As those reviews are likely to take months, lawmakers anticipate that Congress won’t take major action on cryptocurrency until next year.