In a hearing which took place on February 8, Congress rejected the proposal of the Treasury to include stablecoin issuers into a banking structure. However, there will be other reporting and discussions.
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In November 2021, the President's Working Group on financial markets published a report on stablecoins, analyzing what risks they present and what are the ways to regulate the sector.
The report urged Congress to act fast and set a legal framework. According to the paper, regulators must require stablecoin issuers to be insured depository institutions (IDIs). Other entities must be prevented from releasing stablecoins.
Nellie Liang, President Joe Biden's Under Secretary of the Treasury for Domestic Finance restated this approach by testifying for Congress. According to her, tech companies that aren’t licensed as banks shouldn’t offer crypto stablecoins.
Senators raised concerns over this view, saying that it will hold back innovation as stablecoin issuers may go bankrupt if there is a market crisis. Members of Congress said in those cases, the companies may not be able to recover losses, which would lead to broader financial risks. Also, the representatives noted that stable coin issuers mostly operate differently than banks.
On Feb 15, the Senate will hold another hearing on stablecoins. Discussions around the November report with Nellie Liang will continue.
Stablecoins play an important role in the crypto industry as they help to minimize volatility. According to data from CoinGecko, the total market cap of stablecoins stands at above $180 bln.