The United States’ Financial Services Oversight Council is urging the legislature to formulate standards for stablecoin issuance. In a report dated December 6, 2024, the FSOC pointed out that stablecoins could pose a significant threat to the US financial system. It warned that if companies don’t manage the associated risks, uniformly issued stablecoins are susceptible to “runs.” The report stated, “Stablecoin continue to present a potential risk to financial stability as they are highly vulnerable to runs in the absence of appropriate risk management standards.”
A major concern is that Tether accounts for around 70% of the total stablecoin supply. While the FSOC didn’t single out specific entities, it did note that some stablecoin companies lack proper risk control measures. Tether has recently faced public criticism for failing to provide evidence that its issued coins are worth one USD or its equivalent in other assets.
The report also emphasized that many stablecoin issuers are not under federal regulation. Some are only subject to state-level supervision, and numerous companies disclose limited information about their reserves. The FSOC informed Congress that a comprehensive federal framework should be established to govern stablecoin issuer activities and grant a federal agency regulatory authority over the crypto market. This isn’t the first time the FSOC has advocated for legislation. Similar recommendations were made in the 2023 annual reports. US lawmakers are currently considering the Payment Stablecoins Act to regulate stablecoin issuers. Although the bill is yet to be passed, its proponents believe it will be enacted during the next US administration.
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