Janet Yellen, the United States Treasury Secretary, has openly expressed the urgent need for adopting regulatory rules for stablecoins.
Yellen told financial regulators that lawmakers must “act quickly” to establish a legal framework for the stablecoins’ market.
According to reports by Reuters, Yellen aired her sentiments on July 19 in a special meeting that featured the President’s Working Group and other stakeholders of the financial markets. The group discussed the rapid growth of stablecoins in the market, revealing their plans to issue regulatory recommendations in the coming months.
The group also deliberated on stablecoins as a means of payment, a possible risk to the end-user, and their broader impact on the United States financial system and national security.
The Treasury Secretary started advocating for the legal framework on digital assets in February. She warned that the misuse of crypto assets had become a growing problem alongside cyberattacks that escalated amid the global pandemic. At the time, she acknowledged developments of new technologies in the financial sector but also warned about her vision of the reality, stating:
“Cryptocurrencies have been used to launder the profits of online drug traffickers; they’ve been a tool to finance terrorism.”
While speaking after the meeting, Jeremy Allaire, co-founder, and the chief executive officer of Circle, dubbed the meeting as “Very significant,” commenting that stablecoins are here to stay and they might likely become components of the economic and financial systems:
“It’s extraordinary and positive that U.S financial policy leadership are taking this on right now. It’s a sign of how far we’ve come and how fast this is all happening.”
1/14 VERY significant meeting today with Presidential Working Group meeting to discuss appropriate policy and supervision of private stablecoins. Lots to say about this, @SecYellen, @federalreserve , and @USOCC teams.
— Jeremy Allaire (@jerallaire) July 19, 2021
The general growth rate in stablecoins this year has been monumental following the rise in demand for decentralized finance (DeFi). Circle’s USDC stablecoin has turned out to be the best performer so far this year after exploding by more than 577% in circulating supply that amounted to $26.4 billion, according to CoinGecko metrics data.
Yellen’s sentiment on stablecoins comes a few days after Federal Chair Jerome Powell similarly insisted on the same matter over the previous week. Powell advocated for an urgent need to establish a robust regulatory framework for stablecoin. He stated:
“If they’re going to be a significant part of the payments universe, then we need an appropriate regulatory framework which, frankly, we don’t have.”
Earlier this month, Tether, the world’s most popular stablecoin, was kept under scrutiny by the regulators. The United States watchdogs scrutinized Tether after the President of the Federal Reserve Bank of Boston, Eric Rosengren, raised a cautionary flag over Tether’s basket of reserve assets on June 25.
The stablecoins regulatory concerns started in May after stablecoins’ total supply topped $100 billion. Since then, the United States regulators have cited concerns over the sector’s lack of oversight, including the mystery surrounding how stable coins token issuers manage their reserves.