Stablecoins may be widely used, but need regulation, Biden report says

ANKARA

Stablecoins, digital coins whose price is stabilized to a traditional currency, could become widely used in the US but they need to be regulated, according to a much-awaited report by President Joe Biden administration.

"If well-designed and appropriately regulated, stablecoins could support faster, more efficient, and more inclusive payments options," said the report released late Monday by the President’s Working Group on Financial Markets, joined by the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency.

Although they are used today mostly to facilitate trading in digital coins and crypto exchanges, "stablecoins could become widely used by households and businesses as a means of payment," it said.

Some risks, however, include users facing unexpected losses, uncertainty in their financial stability, disruptions to the payment chain that can affect efficiency, systemic issues, illicit finance concerns, and risks to financial integrity.

The report recommended the Congress to enact legislation that would ensure payment stablecoins are subject to federal framework on a comprehensive basis.

Stablecoins, which are crypto tokens pegged or linked to the value of fiat currencies, have seen their market value reaching $130 billion, growing 20-fold in the last 20 months, according to Securities and Exchange Commission Chairman Gary Gensler.

"Though they represent only about 5% of all crypto assets, in October, more than 75% of trading on all crypto trading platforms occurred between a stablecoin and some other token," Gensler said Monday in a statement. "Stablecoins, or certain parts of stablecoin arrangements, may be securities, commodities and/or derivatives."

He warned that stablecoins may be used to avoid traditional banking and financial system, and facilitate illicit activities against anti-money laundering, tax compliance, and sanctions.