Amidst the ongoing regulatory drive in the United States, Hester Peirce, Commissioner of the Securities and Exchange Commission (SEC) has urged the regulator to turn to Congress in its stablecoin drive.
In a tweet, Pierce pointed out that Congress was “actively considering the issue” adding that the SEC and other financial regulators could hold public roundtables pending results from the legislators. She also said that the regulators can’t draft rules using enforcement actions.
Following the collapse of Terra’s UST last year, stablecoins have generated increased scrutiny from regulators across the globe. The regulators have repeatedly highlighted how this asset class could impact the broader financial economy.
The regulators in the US much like the regulators worldwide have been unfavorable regarding stablecoins. Recently, the SEC issued a Wells Notice to Paxos, the stablecoin issuer of the third largest stablecoin, BUSD. The regulator alleged the firm of selling an unregistered security.
Paxos had publicly acknowledged the Wells Notice but “categorically disagreed with the regulator because BUSD is not a security under the federal securities laws.”
This week has witnessed various regulators and organizations consistently discuss the matter of stablecoin regulation. Pierce’s opinion matched Kristin Smith, CEO of Blockchain Association as the latter on Wednesday said that the United States Congress needs to take control of crypto legislation and make the process more “open.”
The CEO hinted towards having a more inclusive process, where the entire marketplace is considered “comprehensively.” She also commented that the industry needs the U.S. lawmakers to lead crypto legislation despite their intervention going to make the process “very slow,” and with the regulators “stepping in” the interim.
On the same day, Agustin Carstens, general manager at the Bank for International Settlements (BIS), said that the events of 2022 have cast “serious doubts on the ability of stablecoins to act as money.”
Notably, in a bid to safeguard investors, the Canadian Securities Administrators (CSA) published a set of new requirements for crypto companies with a primary focus on stablecoin trading platforms.
Trading platforms will be prohibited from allowing customers to buy or deposit stablecoins without the CSA’s prior written consent, and to obtain that consent, companies must satisfy several due diligence requirements, including ensuring that the stablecoin is fully backed by an appropriate reserve. The regulator will only approve a stablecoin if its reserves are made of “highly liquid assets” such as cash and cash equivalents and if those reserves are held with a qualified custodian.
On Monday, Klass Knot, chairman of the Financial Stability Board (FSB), an international body established by G20 that monitors and makes recommendations about the global financial system, commented on the upcoming standards for crypto and stablecoins regulation. Knot issued a letter to G20 finance ministers and central bank governors suggesting that many existing stablecoins would not meet the “high-level” recommendations soon to be established by global institutions like the FSB.