Stablecoins might be regulated in a similar way to bank deposits under the new legislation.
The Securities and Exchange Commission (SEC) wants to regulate stablecoins
According to Bloomberg’s sources, the US Treasury and other government entities are expected to release a report shortly granting the Securities and Exchange Commission new power over stablecoins.
The regulation is likely to apply to centrally issued stablecoins like Tether’s USDT and Circle’s USD Coin and others like Binance USD, TrueUSD, and the Pax Dollar.
Companies would be required to get licenses under restrictions identical to those presently in place for bank deposits. Stablecoin firms like Circle, which aspires to become a commercial bank in the future, have backed this strategy.
Until far, the SEC has mostly focused on regulating cryptocurrency projects that sell tokens with a guarantee of a return, particularly those that conduct initial coin offerings (ICOs) or other similar sales. Under the Howey Test, such assets are usually classified as investment contracts.
What is the SEC’s motivation for seeking authority?
First, Stablecoins, which are meant to minimize price swings and hence are inappropriate for investors seeking big returns, appear to be exempt from the SEC’s jurisdiction at first appearance.
SEC Chairman Gary Gensler, on the other hand, claims that his agency would monitor all tokens used in investing, which includes stablecoins, regardless of their inherent risk. Stablecoins have been compared to “poker chips” by Gensler, meaning that both are a simple way to get into hazardous ventures.
Stablecoins may pose a risk because of the probability of price declines. Even though no major stablecoin has seen a complete value collapse, modest price changes regularly occur.
The ongoing concerns surrounding Tether and Facebook’s forthcoming Diem stablecoin have likely prompted the US government to grant the SEC further jurisdiction.