Treasury Secretary Yellen to regulators: Act quickly on stablecoins

On Monday, July 19, Treasury Secretary Janet Yellen, convened the President’s Working Group on Financial Markets (PWG). The Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation joined the PWG to discuss stablecoins. Yellen was mum on specific conclusions, apart from the general principle that agencies need to move quickly to regulate stablecoins.

Why should we care?
Stablecoins, or digital currencies whose value is tied to the U.S. dollar, have garnered the attention of regulators in recent weeks. Last week, Federal Reserve Chair Jerome Powell, speaking before the House Financial Services Committee, compared stablecoins to money market funds, but without the regulation. Lawmakers and regulators are concerned that consumers won’t be protected if their backing is threatened by a lack of stability of the firms behind them. Some central banks are toying with the idea of launching their own central bank-backed digital currencies (CBDCs) and some have already, including Grenada, St. Kitts, and Nevis. Among the major economies, China is poised to launch its own CBDC and has begun trialling a digital yuan. Meanwhile, the Fed plans to release a report on digital currencies this fall.