The U.S. working group on financial markets is set to meet with Federal Reserve Chair Janet Yellen to examine U.S. stablecoin rules in the coming weeks. While Yellen has always expressed skepticism about cryptocurrencies, she has also recognized the potential of these technologies to enhance the financial sector.
Commercial stablecoins, not government-backed CBDCs, will be the topic of debate in the forthcoming conversation. Yellen will talk to the Federal Reserve to examine digital currencies such as stablecoins, according to a statement today.
Yellen’s Interest in Regulating Stablecoins
Treasury Secretary Yellen has assembled a working group made up of the leaders of the largest financial regulatory agencies to study stablecoin regulation and the associated risks. She will forward the group’s findings to the Treasury Department for further consideration. The U.S. Financial Markets Working Group is an interagency organization whose purpose is to monitor the financial markets.
The press release that was issued when the meeting was announced explains that while Yellen acknowledges the risk that stablecoins pose to users, markets, and the financial system, she also hopes the meeting will help protect users, markets, and the financial system from any risks that stablecoins may pose.
In the near future, the team intends to provide written suggestions. As of December, a paper written by the President’s Working Group, which considered retail payments, has been released, seeking public input on how these kinds of payments are being utilized.
On December 31, the group issued a warning on stablecoins, which mentioned possible dangers including lost end user rights, the possibility of not meeting KYC/AML requirements, and monetary stability. Fed Chairman Jerome Powell, SEC Chair Gary Gensler, and CFTC Acting Chair Rostin Behnam will also take part in the meeting on Monday. However, it is uncertain if current Acting Comptroller Michael Hsu will be part of any future proposals.
In an unexpected move, the U.S. announced the new rules on Tuesday after Chairman Powell told Congress that controls are required surrounding stablecoins before they can become a major component of U.S. payments networks.
What are Stablecoins?
A new type of cryptocurrencies, known as stablecoins, uses an asset reserve to provide price stability. As cryptocurrencies continue to gain in popularity, stablecoins have also begun to see traction. The primary goal of these stablecoins is to offer the fast processing and security or privacy of payments that cryptocurrencies have, while at the same time eliminating the fluctuations in value that fiat currencies exhibit.
A currency like the U.S. dollar or a commodity’s price like gold may be used to peg a stablecoin. Collateralization (backing) or algorithmic methods of purchasing and selling the reference asset or its derivatives provide for price stability in stablecoins.