Janet Yellen, the US Secretary of the Treasury, has urged for a “consistent federal framework” on stablecoins to tackle financial stability concerns.
Yellen restated her earlier position asking for a regulatory framework on stablecoins during a Senate Banking Committee hearing on the Financial Stability Oversight Council Annual Report to Congress on Tuesday, citing a November report from the President’s Working Group on Financial Markets.
The Treasury Secretary also addressed TerraUSD (UST), the third-largest stablecoin by market capitalization, which has dropped to $0.67 in the last 24 hours.
Yellen said:
“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,”
Senator Pat Toomey of Pennsylvania pointed out to Yellen that UST was an algorithmic stablecoin that was “not backed by cash or securities.”
Given the market’s expansion, the Treasury Secretary said it would be “highly appropriate” to aim for a “consistent federal framework” on stablecoins by the end of 2022. She urged members of Congress to work together to pass legislation creating such a framework.
Yellen stated in her written testimony for the meeting that the Financial Stability Control Council was working on a report in response to US President Joe Biden’s executive order on digital assets, noting possible threats to financial stability as well as regulatory oversight gaps.
Since January 2021, Yellen has served as Treasury Secretary in the Biden administration, and she has already stated that cryptocurrencies are a “particular concern” for the government department, linking many token projects to “illicit financing” 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.
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