- Sen. Sherrod Brown has sent letters to stablecoin issuers and crypto exchanges requesting information on how they are protecting consumers and investors.
- Tether in response to the press release issued by Sen. Brown Tether has assured that they would be working with lawmakers to improve the industry.
The recent surge of the crypto market value has called for the need to protect investors through designed regulations. With the majority of the concerns focussing on the highly volatile assets, stablecoins like Tether (USDT) that hold the value and stability of another financial asset have not been spared. In a recent report by the President’s Working Group on Financial Markets, stablecoin was said to pose a huge risk to investors as the unregulated assets are a threat to market integrity and investors’ protection.
The report highlights that stablecoins may lead to “possible fraud and misconduct in digital asset trading, including market manipulation, insider trading, and front running, as well as a lack of trading or price transparency.”
In response to the concerns highlighted in the report, Sen. Sherrod Brown, Chair of the U.S. Senate Committee on Banking, Housing, and Urban has sent letters to stablecoin issuers and crypto exchanges requesting information on how they are protecting consumers and investors.
Read More: Senate Banking Committee wants crypto exchanges to table a detailed report on stablecoins
A copy of the letter was sent to Gemini, Paxos, Coinbase, Tetter, Circle, Binance.US, and TrustToken.
Sen. Brown wrote in the letter to Circle:
I have significant concerns with the non-standardized terms applicable to redemption of particular stablecoins, how those terms differ from traditional assets, and how those terms may not be consistent across digital asset trading platforms.
Tether ready to collaborate to meet investors protection standard
Tether in response to the press release issued by Sen. Brown has assured that they would be working with lawmakers to improve the industry.
We appreciate the interest from lawmakers in the function, purpose, and security of all stablecoins across the cryptocurrency ecosystem. We have been and are pleased to work with policymakers around the world on these important issues.
It is critical that we work collaboratively to build this industry. As pioneers of blockchain technology and leaders in transparency and innovation, Tether is dedicated making sure our customers are properly protected and have the tools they need to succeed. 2/3
— Tether (@Tether_to) November 25, 2021
In early October, the Securities and Exchange Commission (SEC) issued a subpoena of which Circle, the issuer of USD Coin (USDC) pledged to fully cooperate with the regulators. Circle has also hinted that to meet the required accountability standard, it will be working to become more transparent.
Authorities at G20 have also called for the regulation of stablecoins before they are approved for use. Not just that, it was also said the Central Bank Digital Currencies (CBDCs) must be implemented before global stablecoin use.
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Recently, the tech probe launched by the Consumer Financial Protection Bureau (CFPB) included stablecoins. According to Rohit Chopra, the director, stablecoins issued by a big tech firm could see a fast and widespread adoption when it leverages its large user base. SEC Chair Gary Gensler also referred to stablecoins as “Poker Chips” after it was reported that SEC has decided to crack down on the market.
Regulators are primarily concerned about the asset backing of stablecoins though it is said to be pegged in the value to the US Dollar. However, the popular stablecoins are actually backed by commercial paper like Tether and US Treasury debt like USD Coin.