SEC Grabs Stablecoin Reins: Report
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SEC Grabs Stablecoin Reins: Report

Created 1yr ago, last updated 1yr ago

The U.S. Securities and Exchange Commission is about to be given ‘significant authority’ over stablecoins in a Treasury Department report due out this week.

SEC Grabs Stablecoin Reins: Report

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The Securities and Exchange Commission looks set to gain substantial powers to regulate stablecoins for the foreseeable future.

According to Bloomberg, the U.S Treasury Department and several other agencies will release a report this week specifying “that the SEC has significant authority over” stablecoins such as Tether, USD Coin and Binance USD.

Stablecoins are cryptocurrencies pegged one-to-one with the U.S. dollar or other currencies, such as the euro or pound sterling. Stablecoin issuers generally maintain this by maintaining caches of dollars — and sometimes less liquid investments — that back their tokens dollar for dollar. 

Bloomberg cited several anonymous sources familiar with the Treasury report, one of whom said it will call upon Congress to pass legislation regulating stablecoins much like bank deposits.

The report’s conclusions are said to be the result of aggressive lobbying by SEC Chairman Gary Gensler, who argued that his agency “has existing powers to oversee tokens when they’re involved in investment transactions.”

It will also “reaffirm” that the Commodity Futures Trading Commission (CFTC) has a stablecoin oversight role. 

Gensler is extremely familiar with cryptocurrency, having taught the subject at MIT for several years until his appointment to lead the SEC.

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A Rough Ride

The leading stablecoin, Tether, has had a tumultuous few years, having paid millions to settle charges from New York’s attorney general — and just a week ago the CFTC — for misleading investors by claiming USDT was backed by dollars when a large portion of its reserves was in cash equivalents and more risky investments
Stablecoins have had a rough two years, after having rocketed to the top of political agendas in June 2019 when Facebook announced it was backing a stablecoin called Libra — since rebranded Diem
This led to an outpouring of fear and opposition by central bankers, regulators, finance ministries, and politicians around the world that the dollar-pegged cryptocurrencies could undermine national currencies and threaten economic stability — and who heartily distrusted Facebook.
Last week Diem hit back after U.S. politicians demanded that Facebook abandons plans to launch a trial of its Novi wallet with Coinbase.
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