Amid massive growth of the stablecoin market, the United States Treasury Department has reportedly discussed potential regulation for private stablecoins.
The Treasury conducted several meetings last week to examine the risks of stablecoins for users, markets, or the financial system, as well as learn about their benefits and consider potential regulation, Reuters reported Sept 10.
“The Treasury Department is meeting with a broad range of stakeholders, including consumer advocates, members of Congress and market participants,” Treasury spokesman John Rizzo said.
Citing three anonymous sources familiar with the matter, the report notes that one of the Treasury’s meetings took place last Friday, with officials asking the crypto community whether stablecoins would require direct oversight if this type of cryptocurrency becomes widely adopted. They also reportedly discussed how regulators should mitigate the risks if too many people decide to withdraw their stablecoins all at once, and whether major stablecoins should be backed by traditional assets.
Treasury officials also previously met with a group of banks and credit unions to discuss potential stablecoin regulation. One Reuters source said that the officials were collecting information and did not share their thinking on how stablecoins should be regulated.
Related: Stablecoins are assets — not currencies, says ECB president
The Treasury’s increased attention to the stablecoin market follows a parabolic surge of stablecoins over the past year. The total market capitalization of major stablecoins like Tether (USDT) and USDC Coin (USDC) has jumped to more than $125 billion at the time of writing from just around $37 billion in January. Many traditional finance companies like payment giant MasterCard have reiterated their commitment to support stablecoin-related solutions, with Visa claiming that stablecoins are “starting to live up the promise of digital fiat.”
The news comes shortly after U.S. Senator Elizabeth Warren called the cryptocurrency industry the “new shadow bank,” suggesting that it’s “worth considering” banning U.S. banks from holding reserves to back private stablecoins. Previously, U.S. Treasury Secretary Janet Yellen urged the government to act quickly to establish a regulatory framework for stablecoins.