The US financial regulators are asking cryptocurrency firms that operate stablecoins to tighten protections against money laundering to protect US financial and monetary systems.
According to the publication of Bloomberg on Thursday, December 24, the US Department of Treasury and other financial regulatory agencies released a statement on Wednesday asking stablecoin operators to take protective measures so that stablecoin might be used in a way that “effectively manages risk and maintains the stability of the U.S. domestic and international financial and monetary systems.”
A Presidential Working Group on financial markets that includes the head of the Treasury Department, members of the Federal Reserve, the Securities and Exchange Commission(SEC), and the Commodity Futures Trading Commission, in a statement, has asked stablecoin operators to main adequate cash reserves, ensuring a 1:1 reserve ratio and adequate financial resources to absorb losses and meet liquidity needs.
Further guidelines require backers of stablecoin to obtain and verify the identities of all parties conducting transactions, including those involving so-called unhosted wallets, and to have strong strong risk management and cybersecurity protections.
With the rise of crypto markets, the superpower is rushing to implement regulations around this sector. These newly released guidelines by Trump-appointed administrators is the latest move by the administration to apply long-standing financial rules to the growing popularity of the crypto industry. Stablecoins are of particular interest as according to regulators, they are being used at a significant scale in the US for retail payments, and that’s why “the associated risks may require additional safeguards.”
This statement does not come as a surprise. As Wealth Growth Insights previously reported, Congresswoman Rashida Tlaib, Congressmen Jesús Chuy García, and Chairman of Task Force on Financial Technology Rep. Stephen Lynch introduced new legislation to Congress in early December that intends to put all stablecoin-related activities under the control of many governmental bodies.
In September, The Office of the Comptroller of the Currency (OCC) allowed U.S. financial institutions to hold reserves of stablecoins that are backed on a 1:1 basis by a single fiat currency and are redeemable by the holder of the stablecoin on a 1:1 basis for the underlying fiat currency. But stablecoins that use a basket of currencies like Libra are not allowed.
More regulations around digital assets are around the corner. On Wednesday, The Securities and Exchange Commission issued a statement and request for comment regarding the custody of digital asset securities by broker-dealers.
The SEC has requested for comments on the position that, “a broker-dealer operating under the circumstances set forth in the statement will not be subject to a Commission enforcement action on the basis that the broker-dealer deems itself to have obtained and maintained physical possession or control of customer fully paid and excess margin digital asset securities for the purposes of paragraph (b)(1) of Rule 15c3-3.”
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