FSOC notes that stablecoins pose a threat to financial stability amid the 190 billion
FSOC also noted the lack of a robust regulatory framework for issuers of stablecoins. Many issuers operate outside of federal oversight, and some operate under minimal government oversight. The board noted the lack of transparent reporting of assets and reserves, which undermines market discipline and increases the risk of fraud.
Recalling the collapse of TerraUSD (UST), when the stablecoin lost its peg to the U. S. dollar and fell from £1 to £0.09 in 2022, FSOC reiterated the risk of unregulated stablecoins and their potential market destabilization.
To stabilize the current problems, the FSOC has asked Congress to quickly develop a federal law to regulate stablecoin issuers. The law should address issues such as fleeing protection, securing payment systems, maintaining market integrity, and protecting investors. The FSOC also warned that if Congress does not take immediate action, it may take other actions.
#Tether CEO Paolo Ardoino recently expressed concern about the upcoming European MiCA rules, which require stable coin issuers to hold at least 60% of European banks' reserves. Ardoino said that since banks can lend up to 90% of their reserves, these rules create "systemic risks" that could destabilize the #cryptocurrency market.
The FSOC's warning underscores the urgency of regulatory action to ensure the stability of both #cryptocurrencies and traditional financial markets as stable coins grow in popularity.
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