Rising concern about the growing use of “stablecoins” without a regulatory framework led to a meeting Monday of top banking regulators, the Treasury announced.
Recommendations, based on the meeting and on a forthcoming report, are expected to be released “in the coming months,” the agency said.
According to the agency, Treasury Secretary Janet Yellen convened the meeting of the President’s Working Group on Financial Markets (PWG) to discuss the rapid growth of stablecoins, potential uses of the digital currency as a means of payment and “potential risks to end-users, the financial system and national security.”
The PWG includes the Treasury secretary (Yellen), chair of the Federal Reserve Board (Jerome H. (“Jay”) Powell), chairperson of the Securities and Exchange Commission (Gary Gensler) and chairman of the Commodities Futures Trading Commission (Rostin Behnam, acting chairman). All four attended the meeting, held virtually.
Monday’s meeting also included Federal Deposit Insurance Corp. Chairman Jelena McWilliams, Acting Comptroller of the Currency Michael J. Hsu, Federal Reserve Board Vice Chair for Supervision Randal Quarles, and Treasury Under Secretary for Domestic Finance J. Nellie Liang.
A “stablecoin” is a cryptocurrency that pegs its market value to some sort of external reference, such as a reserve asset (which can include fiat currency, gold or some other readily transferable asset). A stablecoin attempts to offer price stability, which it achieves through backing (collateralization) or through algorithmic mechanisms of buying and selling the reference asset or derivatives.
According to Treasury, Yellen used the meeting to underscore “the need to act quickly to ensure there is an appropriate U.S. regulatory framework in place.”
Treasury’s readout of the meeting also reported that the group heard a presentation from Treasury staff on preparation of a stablecoins report, which the agency said would discuss stablecoin potential benefits and risks, the current U.S. regulatory framework, and the development of recommendations for addressing any regulatory gaps.