U.S. Treasury Secretary Janet Yellen.
Photo: roberto schmidt/Agence France-Presse/Getty Images
Top U.S. financial regulators said they are prepared to take action to address risks to the financial system posed by stablecoins, but first are pushing Congress to enact comprehensive legislation providing oversight of the form of digital currency.
The rapid growth of digital assets, including stablecoins—digital currencies pegged to national currencies like the U.S. dollar—is “an important potential emerging vulnerability,” regulators on the Financial Stability Oversight Council, or FSOC, said in their annual report released Friday. The report noted highly volatile prices and the potential for fraud as possible risks in the space.
“If stablecoins are marketed with the claim that they will maintain a stable value, they may be subject to widespread redemptions and asset liquidations if investors doubt the credibility of that claim,” the report said.
Highlighting stablecoins in the report is the latest sign that more stringent risk-management standards could lie ahead for companies that issue the digital asset. The annual report is a wide-ranging assessment of risk in the financial system from a panel of regulators established following the 2007-09 recession. Friday’s report was the first released during the Biden administration and under Treasury Secretary Janet Yellen, who leads the council.
Paul Kiernan contributed to this article.
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