Market Analysis Report (02 Nov 2021)

A new report released by the Biden administration notes that stablecoins could transform the way people pay for things, but adds Congress must introduce regulatory oversight and formal market structure as soon as possible to protect and inform investors, issuers, and exchanges.

The President’s Working Group on Financial Markets revealed in the report that when regulated, stablecoins  could “support faster, more efficient, and more inclusive payments options.” The transition to stablecoins as a payment method, it adds, could occur rapidly due to network effects or “relationships between stablecoins and existing user bases or platforms.”

In a press release Securities and Exchange Commission Chairman Gary Gensler, who is a member of the President’s Working Group on Financial Markets, has said stablecoins need to be monitored to ensure they aren’t backing criminal activities.

The report focused on risks with special concern for what was called “prudential” risk. Prudential risks include a potential run on stablecoins, or an issuers’ inability to honor redemption requests.

To remedy its concerns, the report recommends lawmakers limit stablecoin issuance to insured banks. The move would give government agencies greater jurisdiction over their operations, but some argued that if the requirements go too far, they would disadvantage smaller start-up businesses.

Source: https://www.cryptocompare.com/email-updates/daily/2021/nov/02/