A representative of the US Treasury, the Federal Reserve, the US Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) is the President’s Working Group on Financial Markets (PWG). On December 23rd, 2020, the PWS made a statement in which its primary topic was discussing the matter of stablecoins. Even though the PWS has not done anything radical, there is no denying that the regulatory authority will certainly help the crypto space in general. The group explained in the statement that it would be mandatory for stablecoin issuers to run in accordance with the stock-and-standard regulations and rules of the financial law.
Additional statements made by the regulators included that stablecoins have to have a system in place for complying with the numerous anti-money laundering requirements that are applicable to them before they are allowed to enter the market. However, the most interesting thing to note about this statement is that the PWS did not definitely state whether these stablecoins were currencies or commodities. Instead, they chose to leave this question unanswered altogether. This is important because of the way commodities and currencies are regulated, as they tend to have an easier time operating in the market as opposed to securities and derivatives.
In particular, the PWS said that a stablecoin could be anything from a security to a commodity or even a derivative, and it mostly depended on a variety of factors, including design. As such, this meant that they will be subject to the law of whatever category every stablecoin is classified under. The Deputy Secretary of the US Treasury, Justin Muzinich was quoted in the announcement. He explained that the statement made by the PWS stands as a commitment to achieving different critical objectives when it comes to national security as well as financial security.
Simultaneously, the PWS is also working on improving innovation in the country and the benefits this innovation can provide. This kind of innovation is the cornerstone of nearly every regulator that’s handling new technology that impacts their field, but this is even more so for anything that has to deal with money. However, it is expected that stablecoins should already have some systems in place before they are even launched in the market. The Acting Comptroller of the Currency, Brian Brooks said that the group had reached a position that could be referred to as a productive balance.
This balance was concerned about the role these stablecoins would play in the overall economy, both on a national and global scale, along with the dire need of controlling and regulating these new tools properly. The fact is that if products like stablecoins are left unregulated, this will help make them a breeding ground for different kinds of illegal activities. As a matter of fact, something like this had happened initially with cryptocurrencies like Bitcoin, when they had been new in the market and had been left mostly unregulated and unsupervised and no one wants to see a repeat of that happening.
