A consistent federal framework for the usage of stablecoins was suggested by Janet Yellen to mitigate the risks of financial stability.
Janet Yellen, the United States Treasury Secretary, spoke to the US lawmakers considering the urge for stablecoin regulation following the uncontrollable growth of the market.
The urge to regulate stablecoin
Yellen voiced her opinion in a Tuesday hearing at the Senate Banking Committee. She spoke about her stance on the need for a stablecoin regulatory framework. She also commented about TerraUSD (UST), which is the third-largest stablecoin by market cap. UST came into the conversation as it dropped to almost $0.67 in 24 hours.
“I think [the situation with TerraUSD] simply illustrates that this is a rapidly growing product and that there are risks to financial stability and we need a framework that’s appropriate.”
Yellen
As part of the conversation, Pennsylvania Senator Pat Toomey addressed a question to Yellen. He noted that UST is not backed by securities or cash and that it is an algorithmic stablecoin. Yellen added that it is necessary to envision a consistent federal framework for stablecoins by the closing of 2022. This is considering the notable growth of the market.
Source: Financial Times
In an additional testimony written, Yellen added that the council is also working to deploy a report complying with Joe Biden’s digital assets executive order. The report will identify the major risks that it might pose to financial stability and the gaps that need to be filled in the regulatory framework.
Since January 2021, Yellen has served as Treasury Secretary in the Biden administration. She has already stated that cryptocurrencies are a “special concern” for the government department, linking many token projects to “illicit funding” and money laundering.
Many of her recent public pronouncements on crypto policy appear to have centered on stablecoins and the creation of an acceptable regulatory framework that can possibly mitigate the risks and threats involved with the usage of digital assets.