A recent report by CoinDesk revealed that an official of the Biden Administration had hinted at stablecoin regulations. According to a U.S. federal official, the government is collaborating with Congress to adopt new stablecoin legislation this year.
U.S. Government Making Strategic Moves
CoinDesk reported that the President’s Working Group on Financial Markets met to deliberate on the last day of June. The focus of the meeting was on stablecoins and their legislation and avoiding what happened to Terra UST from taking place in the United States.
Regulators and participants discussed several issues relating to the stablecoin ecosystem, emphasizing algorithmic tokens and how they transact.
Furthermore, at the core of the meeting is how stakeholders could come together to ensure that stablecoin guidelines are approved and implemented before the end of 2022.
According to the official, the House Financial Services Committee is responsible for introducing the new legislation.
Following the UST collapse, stablecoin regulations have come under increased scrutiny from regulators and governments. The huge loss of assets has sent shock waves across the crypto space as the industry struggles to pull itself back together.
The Call for Stablecoin Legislation
Concerning the U.S., the talk about stablecoin regulations did not start today. Following the President’s Working Group on Financial Markets’ directive last November, the clamor for stablecoin regulation is in motion.
According to the report, the Presidential committee wants Congress to regulate the stablecoin space to ensure compliance with laid-down rules. In addition, the committee calls for establishing a formal market mechanism to safeguard investors, consumers, and exchanges.
Furthermore, the group also suggests legislation limiting the number of exchanges that deal with stablecoins.
The U.S. Securities and Exchange Commission chairman, Gary Gensler, also a member of the presidential group, wants stablecoins to be subjected to federal laws.
The likelihood of the proposed stablecoin legislation accommodating several demands is high due to the current crypto market bloodbath.
Moreover, the crash of the Terra UST stablecoin forces regulators to increase the pace of implementing the needed regulations. The UST stablecoin meltdown has created a ripple effect on the broader crypto market, with some exchanges like Celsius and Three Arrows Capital facing insolvency.
The CEO of Terraform Labs, Do Kwon, is under investigation in his home country of South Korea over allegations of fraud relating to the collapse of the Terra network.
Unsurprisingly, the allegations have prompted various to call for further regulatory frameworks to ensure transparency in trading stablecoins.
Therefore, authorities have shown their drive to ensure that the right approach is taken to prevent similar events from happening within their jurisdictions.
It is worth noting that before the UST meltdown, stablecoins were considered more stable than regular cryptocurrencies. Due to being pegged to fiat currencies, most people assume they are immune to market volatility.
However, this is partly true, for the most part, because USDT and others are not going the way of Terra UST any time soon.
Regulators are putting in place measures to bring everything under control.