The Securities and Exchange Commission has won a debate among US agencies to propose legislation and oversee the $131 billion stablecoin market, Bloomberg reported on Monday.
The Wall Street watchdog’s “significant authority” over tokens like tether will be spelt out in a report expected to be published this week, Bloomberg said, citing sources familiar with the matter.
Agencies including the Treasury will ask Congress to pass legislation stating coins should be regulated like bank deposits, one source said.
The report is expected to highlight the SEC’s powers, as Chairman Gary Gensler has been pushing for oversight and the ability to pursue enforcement action.
It will clarify how the Biden administration will regulate the sector, with several agencies including the Commodity and Futures Trading Commission likely to have a role. These developments suggest the government will have clear and active authority over the stablecoin market, while waiting for longer-term plans to be enacted.
Prior versions of the report called on Congress to create a bank-like charter that would treat stablecoin issuers as if they are banks.
Gensler, who has compared stablecoins to poker chips at a casino, has been calling on lawmakers for a while to give the SEC more authority to regulate the industry.
There might be an upside to the SEC winning this battle. According to Jaret Seiberg, a DC-based financial services policy analyst at Cowen, the range of stablecoin issuers could widen under the SEC’s watch, despite its tough stance on these digital assets.
Stablecoins are meant to be less volatile than cryptocurrencies as they are pegged to fiat money like the US dollar. This means companies backing them typically commit to keeping collateral to ensure investors can exchange the tokens for regular money.
But Tether, one of the largest stablecoin issuers with a $70 billion market cap, has been facing heat over whether it’s truly backed by actual dollar reserves at all. In February, it reached a settlement to pay an $18.5 million fine to end a New York probe into reserves backing its coin. More recently, it was ordered by the CFTC to pay a $41 million fine for “untrue or misleading statements” about its US dollar reserves.
The President’s Working Group of Financial Markets is preparing the upcoming report, with the aim of ensuring stablecoins do not threaten the economy, Bloomberg said. They are likely to propose that the Financial Stability Oversight Council formally evaluate the risks such coins pose to the financial system.
Source: Markets Insider