Nellie Liang, the undersecretary for domestic finance at the U.S. Treasury Department, says the agencies that once advocated for regulating issuers as banks are fine with Congress considering a route for nonbanks to be able to issue stablecoins.

On Monday, at a Financial Services Forum event in Washington, Liang said that the President’s Working Group on Financial Markets didn’t intend to be overly strict about how crypto businesses may reach that goal after recommending last year that stablecoins belong inside the regulated banking industry.

“There’s some flexibility under that framework. “It’s meant to be open. It was not meant to limit current banks.”

As per Liang, the issuers of the tokens, which are intended for stability by being backed by assets like the dollar, cannot be regulated solely by the calibre of their reserves; they require a new regulatory framework from Congress.

The Treasury has participated in congressional negotiations, which are still in the early stages. However, according to people familiar with the discussions, a potential bill in the House Financial Services Committee has leaned toward establishing regulations for both banks and nonbanks.

She asserted that although the Treasury and the working group’s regulators desire that all stablecoin issuers be subject to safety and soundness regulations, just like conventional banks are, they shouldn’t be required to have depository insurance and may instead be subsidiaries or affiliates of bank holding companies.

“What we wanted to do was bring it into the banking system, banking system – not necessarily deposit insurance.”

Liang earlier said to the forum’s attendees that Digital assets have the potential to “fundamentally change” payments.

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