LONDON/WASHINGTON (Reuters) – A top official at the U.S. Securities and Exchange Commission (SEC) signalled on Thursday that stricter rules around crypto stablecoins could be drawing closer.
Cryptocurrency markets have an overall value of about $1 trillion this week amid the collapse of the stablecoin TerraUSD and a destabilising plunge in Tether, currently the world’s largest stablecoin by market cap.
Stablecoins are digital currencies whose values are pegged to traditional assets like the dollar.
Referring to tighter regulations, “one place we might see some movement is around stablecoins,” SEC Commissioner Hester Peirce said during an online panel debate hosted by the London-based Official Monetary and Financial Institutions Forum policy think tank.
“That’s an area that has obviously this week gotten a lot of attention,” added Peirce, underscoring the potential that stablecoins can have future use in the marketplace builds.
She added that the SEC has an opportunity to capture digital currencies, and the technology platforms where they are traded, under the agency’s broad rulemaking authority.
U.S. Treasury Secretary Janet Yellen told a Senate banking panel this week that the turmoil in crypto markets illustrated the need for an “appropriate” regulatory framework.
President Joe Biden in March issued an executive order requiring the government to assess the risks and benefits of creating a central bank digital dollar, as well as other cryptocurrency issues.
The SEC’s chair, Gary Gensler, has said that the agency should address stablecoin risks as the asset-linked cryptocurrencies raise concerns related to financial stability and monetary policy around features that are similar to and potentially compete with bank deposits and money market funds.
He has also said there are issues on their potential use for illicit activity.
But on Thursday, Peirce, the SEC’s lone Republican commissioner, said potential regulation should make room for a “trial-and-error” regulatory framework, saying that “some people have suggested that should be at the SEC; other people want it to be the banking regulators.
“There are different potential options for approaching stablecoins…and with experimentation, we need to allow room for there to be failure.”
(Reporting by Marc Jones in London and Katanga Johnson in Washington; Editing by Hugh Lawson and Leslie Adler)