US regulators claim that issuers of stablecoins should be subject to the requirements applicable to banks and financial institutions.
The Presidential Working Group on Financial Markets, chaired by the US Treasury Department, called on the US Congress to oblige issuers of stablecoins to comply with the requirements that apply to banks. According to the working group, stablecoins carry systemic risks and pose a threat to the financial system as a whole.
The main recommendation of the working group is that Congress "urgently" pass legislation that would regulate the issuers of stablecoins in the same way as insured depositories are regulated, and would oblige the issuers of stablecoins to be subject to strict supervision by banking regulators.
Over the past 12 months, stablecoins, including USDT, USDC and BUSD, surged 500% to reach a market cap of $127 billion, according to the report.
While stablecoins are primarily used to trade other cryptocurrencies, they can be widely used by households and businesses to make payments, the report said.
"The rapid growth of stablecoins increases the urgency of this work," the report stated. "Failure to act risks growth of payment stablecoins without adequate protection for users, the financial system, and the broader economy."
According to the working group, regulators need to be given more control over reserves that provide stablecoins. In case of loss of confidence in the asset, there is a high risk of a sale.
"Runs could spread contagiously from one stablecoin to another, or to other types of financial institutions that are believed to have a similar risk profile. Risks to the broader financial system could rapidly increase as well, especially in the absence of prudential standards," the report warned.