The President’s Working Group on Financial Markets (PWG) is expected to publish its long-anticipated report on stablecoins later today.
The PWG includes the US Secretary of the Treasury, the Chair of the Board of Governors of the Federal Reserve System, the Chairman of the Securities and Exchange Commission, and the Chairman of the Commodity Futures Trading Commission.
As the stablecoin market has grown – so has the call for bespoke regulation.
A stablecoin is a digital asset that is tied to another, less volatile asset like a fiat currency like the US dollar or Euro. There have been some algorithmic stablecoins issued in the past as well. Stablecoins are utilized by crypto traders to move in and out of trades parking funds in a dollar clone to remove volatility. Stablecoins are also an important onboarding ramp for those interested in trading crypto.
There are concerns from policymakers that the stablecoin market may become systemically important and thus it is important to know that these digital assets are actually backed by what the issuers claim. Today, the number one stablecoin is dollar-based Tether (USDT) followed by Circle’s USDC. Circle has described USDC more as an updated payments and transfers rails and less that improves upon legacy systems.
At the end of 2020, the PWG stated:
“PWG Members recognize that digital payments, including U.S. dollar-backed and other stablecoin arrangements used as payment systems, have the potential to enhance efficiency, increase competition, lower costs, and foster broader financial inclusion. While encouraging payments innovation, PWG Members emphasize that digital payments systems, including stablecoin arrangements, should be designed and operated in a responsible manner that effectively manages risk and maintains the stability of the U.S. domestic and international financial and monetary systems.”
The report may have a profound impact on the digital asset sector.
Related: President’s Working Group on Financial Markets Publishes Stablecoin Report
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BIG day in cryptoland stablecoin policy. White House / Fed/Treasury report coming today….from Politico: pic.twitter.com/aRgG44SYUi
— Jeremy Allaire (@jerallaire) November 1, 2021