In a market built on risky investment opportunities and cutting-edge tech, stablecoins stand out as a relatively safe monetary instrument. With their value pegged to fiat-backed currency such as the U.S. dollar, stablecoin issuers like USD Coin and Tether have generated a great deal of interest among investors worried about a looming crash.
However, stablecoins have not been exempt from the wave of regulations that has surrounded other popular fintech offerings. Most recently, a bipartisan draft bill under consideration by the U.S. House Financial Services Committee would empower federal regulators to subject stablecoin issuers to the same scrutiny as traditional banks. If the bill passes in its current form, companies would be barred from issuing their own stablecoins, and would be required to follow prudential standards on liquidity and capital.
According to a report late last year by the President's Working Group on Financial Markets, it’s precisely the popularity of stablecoins that has led to this imminent increase in regulatory oversight. “The rapid growth of stablecoins increases the urgency of this work. Failure to act risks growth of payment stablecoins without adequate protection for users, the financial system, and the broader economy,” the report read.