U.S. Treasury Secretary says Congress must act because Stablecoin is at high risk by DailyCoin

A senior Treasury official in charge of financial oversight accused Congress of taking swift measures to regulate stable currencies because of the perceived risk to the U.S. economy and individual investors.

“If Congress doesn’t implement the legislation, so do the regulators [SEC, Fed, Treasury, etc.] they will try to use their authority, ”Nellie Liang, Deputy Minister of the Treasury, said in an interview with Bloomberg. “They can do a little bit here and a little bit there, but if these are basic and not stable for cryptographic assets, they could be a big risk.”

Stablecoins are a type of cryptocurrency that is issued and traded on blockchains that are linked to a “stable” asset outside the chain, such as gold, fiat currency, or government bonds. Shared in a tangible asset, digital currency seems to be more volatile and secure than other cryptocurrencies.

Typically, crypto users will park their profits from the sale of various cryptocurrencies by converting those incomes into stable coins. Stablecoins provide a reliable repository of value and quick liquidity to invest funds elsewhere.

In its latest Financial Stability Report released last month, the U.S. Federal Reserve placed stable currencies among the top threats to U.S. financial stability over the next 12 to 18 months. The Fed’s report is printed twice a year, once in the spring and again in the fall, and its current edition on page 67 ranks a chart / stablecoins as the fifth most serious risk to financial stability, including US-China tensions. and climate issues.

The Risk Report section also noted that the value of stable coins has grown fivefold exponentially over the past 12 months to $ 130 trillion in October 2021.

Here are the main reasons for concern mentioned in the Fed publication:

• The largest stable currency in the marketplace promises to be exchanged at a stable value for US dollars at any given time, but not every token is necessarily backed by a 1: 1 fiat equivalent. Instead, stable currencies are backed by commercial bonds that may lose value or become illiquid. If these assets lose their value, issuers may not be able to meet their redemption requirements.
• Stablecoins has similar structural weaknesses to some money market funds, which can suffer from the liquidation work of investors who can drain their accounts at the same time.
• The report says these shortcomings could be exacerbated by the lack of transparency and standard governance of some assets that protect stable currencies.
• Finally, the stable use of currencies in payments can also lead to potential uses and growth capabilities for payment and financial systems.

Whether the specific threats to Stablecoin were genuine or overly fearful were real enough for Fed members to include in the report.

WOMAN’S MAGAZINE

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