Tightening the Grip

As unsettling as it sounds, the truth is we live our lives under an incessantly turbulent environment. This turbulence is influenced by a lot of factors, but it’s mainly there due to the clash between our desires, values, and approaches. Now, it must be noted that the said clash has a knack of appearing in more than just one way, and some of its variants have proven to be disruptive beyond repair. Hence, in order to limit the ripple effects of such situations, we meticulously regulate all the areas that happen to play a big part in our lives. The concept has done wonders for us, but its changing dynamics have also led to a whole new set of problems. You see, ever since technology made it easier for companies to hide from the regulatory eye, the disorder we tried so hard to curb down has slowly re-emerged on the surface. As if that wasn’t enough, the regulators are now further forced to deal with technology’s most controversial by-product i.e. cryptocurrency. It didn’t take long for cryptocurrency to cause wreak-havoc around the place, and things haven’t changed much even though we are far removed from its introduction. Nevertheless, the regulatory industry is now done playing a passive role within this context. By looking at a recently proposed legislation, it can be assumed that a big change is lurking on the horizon.

The U.S. Treasury Department has presented Congress with a proposal, which will bring stablecoins under the similar regulatory umbrella that essentially houses national banks around the country. This suggested change is largely driven by a need to guard the economy against any possible stablecoin runs. Furthermore, it is also designed to address growing concerns about payment system risk, and economic concentration of power. Despite the fact that stablecoins are less volatile than their distant cousin called bitcoin, the Treasury Department’s report does a great job in detailing all the potential vulnerabilities in play here.

“Runs could spread contagiously from one stablecoin to another, or to other types of financial institutions that are believed to have a similar risk profile,” the report pointed out, thus segwaying into an explanation over how it can eventually impact the entire financial system.

The call for stricter regulation also comes at a time when cases of fraud in the cryptocurrency sphere are increasing by the second. If the legislation is passed, U.S. banks will become exclusive issuers of stablecoins. This, in turn, is expected to put the authorities in position where they are better able to take actions against any unlawful activity.

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