CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
US English

US Treasury: Tech companies shouldn’t sell stablecoin

By Daniel Tyson

22:11, 8 February 2022

Stock ticker behind stablecoin
Stablecoin shouldn’t be sold by tech companies: treasury official – Photo: Shutterstock

According to the Biden Administration, in the US technology companies which aren’t licensed like banks should not offer crypto stablecoins, while some Congressional Republicans pushed back Tuesday during a hearing on the future of digital assets.

During four hours of testimony before the Congressional House Financial Service committee, US Treasury undersecretary for domestic finance Nellie Liang defended the administration by expressing concern that stablecoins are insufficiently regulated.

Liang’s appearance came a month after Meta Platforms’ Facebook set aside plans for a stablecoin project over Washington’s fervent objections. Since rumours started three years ago about Facebook’s plans to establish a cryptocurrency available to its billions of users, regulators have expressed concerns.

Liang said Tuesday there is an “urgent” need for Congress to approve legislation on the rapidly expanding cryptocurrency segment.

“This is an urgent issue given the rapid growth of this market,” Liang said, adding the stablecoin market value has jumped to about $175bn today from approximately $5bn at the start of 2020.

Stablecoin is a digital currency often linked to the US dollar and other fiat currencies. It could be offered by the US government. Similar cryptocurrencies, like bitcoin, ethereum and dogecoin are private.

Regulating stablecoins

Liang’s testimony came after a 2021 President’s Working Group on Financial Markets suggested stablecoins adhere to regulations, similar to those in place for banks.

The undersecretary said Treasury officials are in continued communication with congressional offices concerning proposed legislation about regulating digital assets. Currently, there are bills pigeonholed in Congressional committees on many aspects of the new currency, from taxation to definitions to mining issues.

Minnesota Republican Tom Emmer attacked the President’s Working Group on Financial Markets during his five minutes of time before the committee. Emmer said the report focusses “solely” on the “perceived risk” of stablecoin and doesn’t provide a definition for it.

“But it doesn’t hesitate to assert that the risks are so broad and across jurisdictional lines that only insured depositors or institutions or banks should be allowed to issue them,” Emmer said.

Republican idea

Republican questions during the hearing focussed mainly on whether the federal government should regulate stablecoins, or whether individual states should set rules and regulations on cryptocurrency.

Ranking member Patrick McHenry (Republican-North Carolina) suggested Congress hand over regulation powers to states, allowing them to create a framework instead of the federal government writing comprehensive laws on stablecoins.

BTC/USD

64,925.75 Price
-1.750% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 106.00

DOGE/USD

0.12 Price
-5.900% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 0.0012872

XRP/USD

0.62 Price
-2.850% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 0.01168

SOL/USD

169.30 Price
-6.670% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 2.2652

In response, Liang admitted there is no “explicit law governing” stablecoins in particular, or digital assets in general. But she added the federal government has concerns about “various aspects” of possible consumer protection laws.

She said the President’s Working Group on Financial Markets (PWG) did speak with state regulators before issuing the report on “what level of federal oversight, if any, would be required for innovative technology” like stablecoin.

Federal and state banks

The consensus, she testified, was that stablecoins should follow the same standards as insured depository institutions.

“The PWG report believes that a more consistent, less fragmented framework is preferred,” said Liang, adding the group’s proposal could apply to a state-chartered or federal-chartered bank.

“The state regulatory system is fragmented. There is an issuer, and then there are the custodial wallet providers, the other parts of the arrangement, which are subject to different kinds of regulations. There is no plenary oversight of the entire arrangement,” she said.

In pushing back, McHenry said a single approach to regulating stablecoin would most likely be more efficient for both business and investors.

“You consulted with these regulators but there was no mention of an existing state regulatory framework,” said McHenry. “We know that New York is the most active, and they have a very safe but very robust set of regulations and disclosures, but there’s no mention of New York. There are no lessons learned from the states included in this report.”

Anti-crypto weigh in

Brad Sherman (Democrat-California) said he is leery of cryptocurrency in general and urged caution and greater consumer protection in any legislation dealing with the digital assets.

If states regulate stablecoin, Sherman said there would be no uniformity in the rules, which would essentially bypass federal regulations.

“I’ll just point out that, imagine if we didn’t have any federal regulation of state-chartered banks, the FDIC didn’t propose any capital rules, the FDIC didn’t do any audits. It would only be a matter of time before there was a race to the bottom and we would have banks operating in my state chartered by some other small state and those banks would be going bankrupt because they would have found the jurisdiction that had the lowest capital requirements,” Sherman said.

Related topics

Rate this article

Related reading

The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
Capital Com is an execution-only service provider. The material provided in this article is for information purposes only and should not be understood as investment advice. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents and has not been prepared in accordance with the legal requirements designed to promote investment research independence. While the information in this communication, or on which this communication is based, has been obtained from sources that Capital.com believes to be reliable and accurate, it has not undergone independent verification. No representation or warranty, whether expressed or implied, is made as to the accuracy or completeness of any information obtained from third parties. If you rely on the information on this page, then you do so entirely at your own risk.

Still looking for a broker you can trust?

Join the 630,000+ traders worldwide that chose to trade with Capital.com

1. Create & verify your account 2. Make your first deposit 3. You’re all set. Start trading