U.S. Treasury: SEC Will Have Significant Authority To Regulate Stablecoins
The U.S. Securities and Exchange Commission (SEC) could soon have ‘significant’ authority to regulate stablecoins, according to a report by Bloomberg.
SEC Wants to Regulate Stablecoins
According to Bloomberg sources the U.S. Treasury and other government bodies will soon publish a report giving the Securities and Exchange Commission new authority over stablecoins – cryptos pegged 1:1 to fiat currency.
The policy would likely apply to centrally issued stablecoins such as Tether’s USDT stablecoin and Circle’s USD Coin, and others such as Binance USD, TrueUSD, and the Pax Dollar.
The rules, similar to those that are currently applied to bank deposits, would require companies operating in stablecoin to seek appropriate licenses. This approach has gained support from stablecoin companies like Circle, which is planning to become a commercial bank in the future.
In the past the Securities and Exchange Commission has mainly focused on regulating cryptocurrency projects that sell tokens with a promise on returns, especially companies that run ICOs or similar sales. Such assets typically are considered investment contracts under the Howey Test.
Why Does the SEC Want Authority?
However it wouldn’t seem that, the SEC’s purview applies to stablecoins, which are designed to avoid price fluctuations and therefore are unsuitable for investors seeking high returns.
The SEC’s regulatory mandate is “to protect the small investors”, while in practice it might seem to many that it’s more likely to keep the big powers in play and prevent smaller new players to move in.
SEC chairman Gary Gensler, however, says that his regulatory body aims to oversee any tokens involved in investments, a category that includes stablecoins regardless of their inherent risk. Gensler previously compared stablecoins to “poker chips,” implying that both are an easy on-ramp to risky investments.
Gensler is seeking to make clear the government will take a more active role in stablecoin regulation in the short-term while awaiting legislative changes in the long term, according to the report.
Furthermore, stablecoins carry risk due to the possibility of declining prices. Though no major stablecoin has experienced a total collapse in value, minor price fluctuations do occur on a regular basis.
Ongoing controversies around Tether and Facebook’s upcoming Diem stablecoin have likely motivated the U.S. government to give new authority to the SEC as well.
