Stablecoins face a crackdown in the U.S. as regulators discuss risk council review.

According to the BNN Bloomberg report, U.S. officials are discussing launching a formal review into whether Tether and other stablecoins threaten financial stability, scrutiny that could lead to dramatically ramped-up oversight for a fast-growing corner of the crypto market. After weeks of deliberations, the Treasury Department and other federal agencies are nearing a decision on whether to launch an examination by the Financial Stability Oversight Council, said three people familiar with the matter who asked not to be named in commenting on closed-door discussions. 

FSOC has the power to deem companies or activities a systemic threat to the financial system. 

FSOC has the power to deem companies or activities a systemic threat to the financial system — a label that typically sets off tough rules and aggressive monitoring by regulators. The report further mentions that such a designation would likely be a gamechanger for stablecoins, which are crucial to the crypto market because traders widely use them to buy Bitcoin and other virtual currencies. Hitherto stablecoins have thrived in the unregulated shadows, with tokens in circulation now worth more than $120 billion, according to CoinMarketCap.com.

The President’s Working Group plans to issue stablecoin recommendations by December. 

The President’s Working Group on Financial Markets, which Treasury Secretary Janet Yellen leads, has been particularly focused on Tether’s claims that it holds massive amounts of commercial paper — debt issued by companies to meet their short-term funding needs. In a private meeting U.S. officials held earlier in July, they likened the situation to an unregulated money-market mutual fund that could be susceptible to chaotic investor runs if cryptocurrencies plunge. The President’s Working Group plans to issue stablecoin recommendations by December, and a consensus is building among regulators involved that an FSOC review is warranted, the people said.