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Earlier this week the first report from The Presidents Working Group on Financial Markets was made public. Upon its release it faced a swift rebuke from many Republicans due to what was being proposed. More government regulation over something that the party does not feel needs governmental interference. There was an exception and that exception is vital as the Republican commissioner for the SEC was in favor thus far of the regulations proposed.
So what are they?
The Working Group believes that Stablecoin issuers should be treated as banks and thus be regulated like banks are. This would not be great for a Tether as it would fail to meet the basic requirements for its liquidity to even be considered a viable bank. When you add in the amount of Tether (stablecoin) they have issued that would fail to meet the requirements of a bank. Another issuer of stablecoins, Circle, who issues USDC and has fully backed reserves was consulted by the group and found some of the recommendations positive and some which were going to be problematic.
Both Tether and Circle have made it clear though that they would support regulation framework for them to further grow their business but it will be an interesting thing to see what all is adopted and what is not. If this regulation is not included in the Build Back Better Bill that is supposed to be presented to the House next week it is highly unlikely that this regulation will be addressed this year.
Even the group Public Citizen who serves as a consumer advocacy group said that there were holes within this recommendations. That this could turn into Congress punishing innovation and giving Wall Street the power to full the field in this emerging part of the economy. No one thus far has come out outright criticizing and saying that the stablecoin should die and in the report it was mentioned that private stablecoins could serve as a great facilitator without the need of a central backed currency,
One thing though that was really not addressed and could possibly fall through the crack and emerge even strong are two different stablecoins in particular. The first is DAI as since it has collateral it really is not addressed in this and because of it decentralized nature. The other is Ampleforth or AMPL, one of the tipping tokens on this website, because of all the mechanisms that are within the flux of the amount of coin you have and the fact it is not pegged to a dollar exactly.... rather it is pegged to $1.06 to be exact. The way that these two are backed could allow them to really dodge this regulation that is being talked about.
Again it is really going to depend on the Build Back Better or BBB legislation and if/or it is passed as right now it really is a coin toss. If regulation is not included in this bill it would require bipartisan support which I would not see happening this year meaning that until next year I would not expect to see anything happen. Interestingly enough time is running out even for the BBB plan with only 4 weeks of Congress being in session left.
While the working groups report is out it continues to show that no one is united in even what it says. Really it is a big old punt it to someone else idea that is in play. Both the issuers, regulators, and advocacy groups are all saying that there are issues with what the working group has presented and even that really kicks the whole thing over to Congress which means a bunch or studies and investigation into what does what and how it all functions. This all takes time as well with the holiday break approaching wont be a quick turn around unless it is included in the BBB Bill that is supposed to be presented and voted upon next week.
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