After shocking the crypto-verse with what is possibly the most ambitious lawsuit in the history of the U.S. crypto industry (accusing Ripple of issuing unregistered securities for more than $1.3 Billion), today the country’s regulators issued a major statement regarding how they foresee the future of stablecoins and, spoiler alert, the landscape looks heavily regulated.
On December 23, 2020, The President’s Working Group on Financial Markets released a statement on critical regulatory issues relevant to the stablecoin industry. According to the taskforce, a clear set of rules needs to be created to ensure that a potential mass adoption of stablecoins does not undermine government interests.
The document has only 4 sheets but is quite broad content-wise, touching on points that range from the technical aspect to international geopolitics. Although it assures that stablecoins have the potential to dynamize payments, it emphasizes the concerns about the little control that governments have over this new form of money.
What’s Inside The Statement: Stablecoins Could Be Securities, Needint LOTS of Regulations
The taskforce was firm about the need to step up the regulatory policies, very much in line with Rashida Tlaib’s proposal to require banking licenses for stablecoin issuers:
In the United States, these obligations include registration with the Financial Crimes Enforcement Network (FinCEN); developing, implementing, and maintaining an effective anti-money laundering program (AML program); recordkeeping and reporting requirements, including suspicious activity reporting; and a tailored risk-based sanctions compliance program.
The logic here seems that the United States does not expect to differentiate stablecoins from other traditional centralized or non-centralized products.
On the other hand, there is also the possibility that stablecoins are considered securities, which would make them very difficult to trade in the most popular crypto exchanges. This could have serious consequences, considering that USDT is one of the most traded coins in the industry along with BTC.
Depending on its design and other factors, a stablecoin may constitute security, commodity, or derivative subject to the U.S. federal securities, commodity, and/or derivatives laws. If so, the federal securities laws, 3 and/or the Commodity Exchange Act (“CEA”), 4 would govern the stablecoin itself, transactions in, and/or participants involved in the stablecoin arrangement.
Finally, they develop a series of safeguards to be adopted by stablecoins geared towards retailers, citing examples such as a certification of reserves to ensure that they have a 1:1 peg against the dollar, increased disclosures of transparency and reports to the government, the fact that “stablecoin arrangements should have the capability to obtain and verify the identity of all transacting parties, including for those using unhosted wallets,” and the importance that stablecoins do not undermine confidence in the fiat dollar.
US Regulators Are More Interested in The Crypto Industry
Treasury Deputy Secretary Justin Muzinich said in an official press release that “the statement reflects a commitment to both promote the important benefits of innovation and to achieve critical objectives related to national security and financial stability.” He assured that they will continue working on this issue and expect the greatest possible collaboration from the industry and national and international regulatory bodies.
The United States has been exploring possibilities to control the crypto industry for some time, especially considering that the USDT stablecoin outperforms any other token in terms of usability —even bitcoin.
As CryptoPotato previously reported, just two weeks ago, Congresswoman Rashida Tlaib, along with two other lawmakers, introduced the new Stablecoin Tethering and Bank Licensing Enforcement (STABLE) Act, as a proposal to order stablecoin issuers —such as Tether for USDT or Circle for USDC— to have a banking charter and be licensed by multiple federal agencies before they can even think about issuing a token.
Crypto-currency enthusiasts rejected this measure as a low blow to the industry. The attack on Ripple was also condemned by the company’s CEO under the same argument.