US Treasury weighs threats and benefits of stablecoins in talks with banks

US Treasury officials discussed risks and benefits of stablecoins with representatives from the banking community and credit unions. Reuters, citing its own sources, reports.

Financial regulators are working to understand the risks and opportunities that stablecoins pose to the traditional US financial system. Over the coming months, reports on this topic are expected.

In July, a meeting of the President’s Working Group on Financial Markets (PWG) was held. Its participants discussed the rapid growth of stablecoins, their use as a means of payment, and potential risks for end users, the financial system and national security.

At one of the meetings with representatives of the banking community, the question of whether direct supervision over stablecoins would be appropriate if they continue to gain in popularity was discussed. Other topics included reducing the potential risks of mass conversion of assets into fiat and safeguarding the stability of stablecoins.

Officials also received input on the structuring of stablecoins, their use-case scenarios, the adequacy of the current regulatory framework and other aspects of reliability and security.

“As the PWG’s work continues, the Treasury Department is holding meetings with a broad range of stakeholders, including consumer advocates, members of Congress and market participants,” said Treasury spokesman John Riccio.

Earlier, on July 15, the head of the Federal Reserve, Jerome Powell, expressed doubts about the need for stablecoins. He compared stablecoins to money market funds and savings banks.

In June, Boston Fed President Eric Rosengren stated that stablecoins threaten the financial system. Deputy Chair Randall Quarles urged not to fear stablecoins.

Earlier, a study by Yale University economist Gary Gorton and Fed lawyer Jeffrey Chang. They predicted a return of the United States to the era of “wildcat banking” in the 19th century in the absence of proper regulation of stablecoins.

In August, the Centre Consortium behind USDC said it intends to move reserves of the token into dollars and Treasuries.

The issuer of the stablecoin USDT, Tether Limited, in a July report indicated that the share of cash and bank deposits that can be redeemed within two days or less was around 10%.

The Paxos behind Pax Dollar (formerly Paxos Standard), Paxos confirmed 100% backing of each issued USDP and BUSD with US dollars and their equivalents.

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