A back-and-forth on Stablecoin regulation between the US Congress and the US Treasury department has left the fate of Stablecoins hanging in the balance. Nellie Liang, the US Treasury secretary, last week, called out the US congress for what she believes is a marked sloppiness in the formulation of regulations regarding Stablecoins.
Liang expressed the intent of the treasury department to circumvent the Congress and crystallize laws for Stablecoins if delays tend to continue. Back in November, a 26-page joint report released by the Presidential Working Committee, the Office of the Comptroller of Currency, and the Federal Deposit Insurance Corporation, shifted all responsibility to the Congress which has since held two inconclusive hearings dedicated to examining Stablecoins.
In one of its hearings, top crypto-critic and chairman of the US Senate Banking Committee, Senator Sherrod Brown, called Stablecoin investment “gambling” stating that he does not believe “Stablecoins will offer what they intend.” Brown called for more regulation and transparency, especially in the disclosure of stablecoin reserves, adding that all Stablecoins must be pegged 1:1 to the US Dollar.
What pegging looks like for the No.1 Stablecoin
Tether USDT, the top global Stablecoin with a market cap of approximately $76 Billion, has remained the target of many stablecoin criticisms, especially in the US. Ever since launching in 2014 as RealCoin, the stablecoin provider has boasted seven years of dollar-parity stability. Tether’s surprising consistency has remained a cause of concern for regulators who believe it needs to disclose the composition of its reserves to investors.
Six months ago, an accounting firm operating in the Cayman Islands cleared the air on Tether’s reserves. The results reveal close to 50% of its reserves as made up of Certificate of Deposits and commercial paper with only 10% (or $6.2 Billion) of its assets available in cash and bank deposits. Tether defends that it has the ability to manage its value and keep the USDT stable for even longer periods of time but lawmakers appear to be unconvinced.
What does Biden say about Stablecoins?
US President, Joe Biden wants Stablecoins to be issued only by banks. This suggestion has raised many eyebrows, among top crypto proponents like Elon Musk, and Senator Pat Toomey, who both believe it is an attempt to stifle innovation and leash cryptocurrencies into the web of centralization.
Whatever regulations emerge, as requested by Liang, it must tread with the caution that Stablecoins and its $130 Billion industry, have become the indispensable intermediary in the world of cryptocurrencies and a vital key to widespread crypto adoption going forward.