Stablecoins, digital assets designed to maintain a relatively stable price, have gained attention from policymakers. The Financial Services Oversight Council (FSOC) 2024 Annual Report highlights concerns over the lack of transparency and trust in issuers’ holdings and reserve management practices. This report has prompted calls for new legislation to regulate stablecoins and prevent potential risks to the financial markets.
The FSOC argues that transparent information would compromise holders and hinder analysts from making accurate market analyses. In response, the council is urging US Congress to discuss and pass legislation regulating stablecoins and their issuers. Outgoing Treasury Secretary Janet Yellen has also called for reviewing and passing new legislation in February 2024.
Tether, the top stablecoin with a $138 billion market capitalization, faces scrutiny over its lack of transparency. The FSOC report does not specifically target Tether but notes that its failure to provide transparent audits raises concerns about its stability. Industry experts, such as Cyber Capital founder Justin Bons, have warned about the potential collapse of Tether if it fails to hold sufficient reserves.
The FSOC’s recommendation is for new legislation to cover stablecoins and address potential risks. This includes authorizing federal financial regulators with rulemaking powers over digital assets. If no legislation is passed, the council is ready to consider other measures to manage risks.
Source: https://bitcoinist.com/us-council-sounds-the-alarm-crypto-oversight-needed-for-stablecoins