As such, the House of Representatives Committee on Financial Services held a virtual hearing on Tuesday, Feb. 8 to further map out its long-term plans with respect to the emerging market. During that meeting, Under Secretary of the Treasury for Domestic Finance Nellie Liang testified to discuss considerations and concerns with respect to regulating the coins.
“Stablecoins are part of an emerging set of digital assets, activities, and services that could have profound implications for the U.S. financial system and economy. Treasury supports responsible innovation that helps meet the evolving needs of users and the financial system,” said Liang. “But stablecoins also raise policy concerns, including those related to illicit finance, user protection, and systemic risk. To mitigate these risks while supporting the potential benefits from innovation, Treasury believes that regulation of stablecoins should be clear and consistent.”
During her testimony, Liang pointed out the market capitalization of the stablecoin industry was close to $5 billion at the beginning of 2020. Now, that market cap is close to $175 billion, and that exponential growth highlights the urgency of the need to build a more concrete framework.
Liang also pointed out that last year the President’s Working Group on Financial Markets, alongside the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation, took the first steps in addressing these concerns with the publication of a comprehensive report on the matter. This month's meeting was the continuation of the effort to evaluate the risks and potential value of the emerging digital asset.
Additionally, recent speculation has circulated indicating President Joe Biden was preparing to issue a separate Executive Order addressing the threat to national security that digital currencies could pose.
From Twitter
Teana Baker-Taylor @TeanaTaylor
"@RepAnnWagner 'We should acknowledge and look to the regulatory frameworks in place for #stablecoins at the state level, instead of pretending that they don’t exist'"
According to the financial services committee, the House, through its hearings, is examining everything from how to protect stablecoin investors to how their proliferation impacts privacy and financial inclusion and the ramifications of adopting central bank digital assets. As part of the initiative, the committee is also soliciting the perspectives of industry participants like the CEOs of stablecoin issuers and market exchanges.
Liang also addressed how stablecoin adoption would impact the “concentration of economic power,” and the role commercial entities would have in expressing that power. One specific concern the undersecretary expressed was with regards to the competitive advantage stablecoin wallet providers might enjoy as they operate.
“These policy concerns are analogous to those traditionally associated with the mixing of banking and commerce, such as advantages in accessing credit or using data to market or restrict access to products,” she said.
Additionally, those same providers could also grow to become “dominant,” Liang warned.
“Market power with respect to payments could reduce incentives for further investment in payments innovations or lead to higher prices for payment services,” she testified.
From Twitter
WallStreetBets & Co. @WSBConsensus Feb 2
"The Senate Banking Committee has slated a February 15 hearing entitled “Examining the President’s Working Group on Financial Markets Report on Stablecoins,” according to the body’s February hearing schedule.
Ultimately, Liang said, at present, the regulatory framework in place does not offer a “consistent and comprehensive standard” addressing stablecoins as a form of payment.
“Some of the largest stablecoin issuers operate with limited regulatory oversight, raising significant questions about whether these stablecoins are adequately backed and other aspects of their operations,” she added.
