Economy

US Treasury head urges regulatory framework for stablecoins

Framework to address risks such as safety, consumer protection, payment systems

Övünç Kutlu   | 02.07.2022
US Treasury head urges regulatory framework for stablecoins

ANKARA 

US Treasury Secretary Janet Yellen urged regulatory framework for stablecoins, cryptocurrencies designed to be protected from volatility.

"Secretary Yellen highlighted the need to continue to constructively engage in serious legislative efforts to promptly put in place a regulatory framework for stablecoins that would address current and future risks," the Treasury Department said in a statement on Thursday.

Such risks included safety, consumer protection and payment systems in stablecoins and the cryptocurrency market.

Yellen met President Joe Biden's Working Group on Financial Markets, in addition to the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation and the Consumer Financial Protection Bureau.

"Secretary Yellen emphasized how recent events have underscored the urgent need to ensure that stablecoin arrangements are subject to a federal framework on a consistent and comprehensive basis," the statement added.

Yellen's comments came after two stablecoins in recent months, TerraUSD and USDD, broke their US dollar pegs.

The controversial stable coin TerraUSD, known as UST, was initially designed to be pegged one-to-one to the dollar through an algorithm, but saw its price plummet to almost $0 in a matter of weeks.

USD Coin, or USDD, plummeted to $0.9255 last month, while it was also designed to be pegged to the dollar.

Biden signed an executive order in March to ensure responsible innovation in digital assets and cryptocurrencies, which outlined "the first ever, whole-of-government approach to addressing the risks and harnessing the potential benefits of digital assets and their underlying technology," according to the White House.

The order laid out a national policy for digital assets in six areas: consumer and investor protection, financial stability, illicit finance, US leadership in the global financial system and economic competitiveness, financial inclusion and responsible innovation.

It also included exploring a central bank digital currency (CBDC) by placing urgency on research and development.

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