The U.S Treasury Division’s Monetary Stability Oversight Council (FSOC) says the position of stablecoins as a bridge between the digital asset market and the broader monetary system warrants continued consideration.
In its 2024 annual report, the FSOC says that stablecoins – commodity or currency-pegged cryptocurrencies – don’t have satisfactory safeguards in opposition to dangers and failures.
“Because the Council has said during the last a number of years, stablecoins proceed to characterize a possible danger to monetary stability as a result of they’re acutely weak to runs absent acceptable danger administration requirements.”
The FSOC says the shortage of precautionary measures turns into extra regarding as a result of greater than half of the stablecoin sector’s complete market worth is held by a single agency: USDT issuer Tether.
USDT’s complete market cap is roughly $138 billion, representing round 70% of the worldwide stablecoin market, in keeping with FSOC.
“On condition that agency’s market dominance, if it continues to develop, its failure might disrupt the crypto-asset market and create knock-on results for the standard monetary system.”
The council says many stablecoin issuers are additionally working exterior of the prudential regulatory framework, which will increase the chance of fraud.
“Though just a few are topic to state-level supervision requiring common reporting, many present restricted verifiable details about their holdings and reserve administration practices.”
Amid the continued progress of the crypto market, the FSOC urges legislators to enact legal guidelines to mitigate dangers associated to stablecoins.
“The Council recommends that Congress move laws making a complete federal prudential framework for stablecoin issuers to handle run danger, cost system dangers, market integrity, and investor and shopper protections, together with for entities that carry out providers essential to the functioning of the stablecoin association.”
Learn the total report here.
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