The US Treasury Department has apparently explored potential regulation for private stablecoins, despite the market’s expansion. The officials are studying the risks involved if too many people decide to withdraw their stablecoins all at once.
According to Reuters, the Treasury held numerous meetings last week to assess the dangers of stablecoins to users, markets, and the financial system, as well as to learn about their benefits and explore potential regulation.
Treasury spokesman John Rizzo stated, “The Treasury Department is speaking with a broad spectrum of stakeholders, including consumer groups, members of Congress, and market participants.”
According to the story, one of the Treasury’s discussions took place last Friday, with officials asking the crypto community whether stablecoins would require direct monitoring if they become widely embraced, citing three anonymous persons acquainted with the situation.
They also discussed how regulators should limit risks if a large number of individuals withdraw their stablecoins at once, as well as if major stablecoins should be backed by traditional assets.
Previously, Treasury officials met with a group of banks and credit unions to discuss possible stablecoin regulation. According to a Reuters source, officials were gathering information and refusing to offer their thoughts on how stablecoins should be controlled.
The Treasury’s increasing focus on the stablecoin market comes after a meteoric rise in the number of stablecoins over the past year.
The overall market value of key stablecoins such as Tether (USDT) and USDC Coin (USDC) has risen to over $125 billion at the time of writing, up from roughly $37 billion in January.
Many traditional financial institutions, such as MasterCard, have reaffirmed their commitment to promote stablecoin-related solutions, with Visa noting that stablecoins are “beginning to live up to the promise of digital fiat.”
The announcement comes after US Senator Elizabeth Warren dubbed the cryptocurrency business the “new shadow bank,” adding that it would be “worth considering” prohibiting US banks from maintaining reserves to support private stablecoins.
Treasury Secretary Janet Yellen previously asked the government to establish a regulatory framework for stablecoins as soon as possible.
