Given the rapid expansion of the stablecoin industry, Janet Yellen calls for a consistent federal framework. Yellen advocates for establishing such a regulatory framework by the end of 2022 in the United States.
According to the U.S. Secretary of the Treasury, Janet Yellen, a uniform government framework on stablecoins is a must. The main reason she advocates is to address concerns about financial stability.
Following the statement of Yellen, she notes that stablecoins should be subject to federal regulation. Additionally, Yellen addressed this issue to the Senate Banking Committee on Tuesday in reference to a November report from the President’s Working Group on Financial Markets. Regarding the issue, Treasury Secretary Mnuchin added some comments referring to TerraUSD (UST). As per the record, TerraUSD is the third-largest stablecoin by market capitalization.
Furthermore, Yellen thinks that the TerraUSD case just highlights that this is a quickly increasing product. Therefore, there are risks to financial stability, and the main step they should take is building a suitable structure.
A Uniform Federal Framework
In light of the UST scenario, Senator of Pennsylvania Pat Toomey drew attention to the fact that UST is an algorithmic stablecoin. In regard, Toomey emphasized that it is not backed by cash or securities. Correspondingly, Treasury Secretary Jacob Lew noted that they should push for a uniform federal framework on stablecoins by the end of 2022. In order to implement this approach, she urged members of Congress to work together across party lines.
Looking at Yellen’s written testimony, the Financial Stability Oversight Council was working on a report in accordance with President Joe Biden’s executive order. The main focus of the report was on digital assets, assessing potential threats to financial stability and any regulatory gaps. As part of efforts to build a national framework on crypto, the order asked for the coordination and consolidation of policy by numerous government entities.
In general analyses, there are different concerns that Treasury Department has encountered. The main concerns include token initiatives associated with illegal financing and money laundering. Meanwhile, stablecoins and the establishment of a correct regulatory framework appear to be the main public callings of Yellen.