White House Advisory Group Releases Report Emphasizing Regulatory Challenges over Stablecoins
The US government is very concerned about privately-owned stablecoins as they could pose a threat to the US dollar. The Working Group of the president on Financial Markets has rolled out a critical report offering a regulatory framework for the stablecoins.
It was expected as the user base of the private stablecoins was increasing, and there was a need to regularize them. In the document, the financial advisors asked the US government to establish necessary rules and regulations regarding stablecoins that are running successfully in the financial world.
They have also recommended setting important measures, such as strong anti-money laws, and initiatives to stop the financial support of terrorism with cryptocurrency. It also explains the potential threat of the fiat-based cryptocurrencies for fiat currencies, such as the US dollar.
Necessary Conditions for Stablecoins’ Operators
Their recommendation was similar to Rashida Tlaib’s proposal in Congress. The Congresswoman outlined a regulatory framework where the operators of the stablecoins will need to obtain a license from the concerned federal regulators.
“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.”
In order to avoid any existential threat to fiat currency, there is a need for a proper sandbox so that “arrangements should not undermine confidence in and the ability of domestic fiat currencies.”
If stablecoins perceive as securities, it is a very risky thing for their trading over the prominent crypto trading platforms as security operators are required to register with regulators. “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,” the document reads.
The US regulators are not worried about the growing cryptocurrency industry, but they are interested in regularizing them to empower innovation and new-era technologies. Justin Muzinich, the Treasury Deputy Secretary, said the recommendations in the document are beneficial for “innovation” in the industry, and on a wider scale, it is good for financial stability and national security.
Recently, the Securities and Exchange Commission (SEC) filed a lawsuit against San Francisco-based crypto company Ripple for selling unregistered securities worth over $1.3 billion. After SEC’s lawsuit, the crypto community reacted by dumping the coin by 30% in a single day.
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