Late last year, the US Senate Committee on Banking, Housing and Urban Affairs held a hearing on stablecoins. The focus of the hearing was on how they work, how they are used and what their risks are. USD Coin (USDC) was among the stablecoins under scrutiny, with stablecoiners receiving some tough questions from lawmakers.
The hearing also touched on central bank digital currencies (CBDCs) and the possible effect of stablecoins on financial stability and the effectiveness of monetary policy. Following the hearing, another U.S. Congressional Subcommittee hearing on crypto mining and the environment targeted Proof-of-Work mining and Bitcoin mining. buy Bitcoins) in particular.
An increase in activity comes in the midst of an increase in government control of the cryptocurrency market around the world. The governments of the UK, India, EU and China are among others who have taken a closer look at digital assets and, in some cases, crypto mining.
The NFTs and the US Treasury collide
Just last week, the US Treasury highlighted concerns about the NFT market and money laundering. A spike in illegal activity amid rising trading volumes has attracted the attention of the US government. The US Treasury press release followed news that the Biden administration announced the imminent release of an executive action. The White House will instruct agencies to take a closer look at cryptocurrencies, crypto mining and NFTs.
A clear trend is developing, with lawmakers in the United States not only looking at Bitcoin mining and cryptocurrency taxation.
The US Treasury intervenes on Stablecoins
This week, the US Treasury and digital assets are back in the limelight, with stablecoins as the area of focus. On Tuesday, a US House of Financial Services committee held a hearing on stablecoins. The hearing provided some conflicting views on stablecoins, with the US Treasury calling for stablecoins to fall under the mandate of "federally insured depository institutions."
US Treasury Representative Jean Nellie Liang spoke of political concerns that include illicit finance, user protection and systemic risk. Liang added that stablecoins are "banking and investment-like products". This has allowed them to fall into a "regulatory vacuum".
Lawmakers took a mixed view, however, raising concerns that such a move would hinder innovation. There were also concerns of over-regulation and that "bank-like regulations would be inappropriate for stablecoins."
Diverging views on how to manage stablecoins required a more detailed discussion of stablecoins. Unlike the hearing on Bitcoin mining and environmental impact, Tuesday's hearing suggested there was scope for stablecoins to fall outside of banking product regulations. Whether the US Treasury will manage to get its way, however, remains to be seen.
