Just days after stablecoin issuer Tether Ltd paid a $41 million penalty after the Commodity Futures Trading Commission found the company had falsely claimed it had adequate dollars in reserve to back its tokens (following an $18.5 million settlement paid in February to the New York attorney general’s office over a similar probe), Bloomberg reports that the Securities and Exchange Commission has won the 'battle of the regulators' to move ahead as the main watchdog over stablecoins.
SEC Chair Gary Gensler is supportive but politically careful when he expresses his views on the crypto-space
“I taught this and studied it for many years at MIT and I wouldn’t have dedicated my time to it if I didn’t think it was interesting and innovative,” Gensler said in September.
“But, at the same time, I don’t think technologies last long outside of a social and public policy framework and in this case, we have to insure for investor and consumer protection.”
And now Bloomberg reports, the Treasury Department and other agencies will specify in a highly-anticipated report, expected to be published this week, that the SEC has significant authority over tokens like Tether, said people familiar with the matter.
The report will also urge Congress to pass legislation specifying coins should be regulated similarly to bank deposits, one of the people said, asking not to be named because discussions are private.
The revisions he sought make clear that the government will take an active role in regulating stablecoins even as it waits for longer-term plans to be implemented, but, of course, any broad regulatory bill faces long odds in a divided Congress and could take years to enact.
This is, relatively speaking, being seen as a positive development since 1) it avoids the one-upmanship that could have occurred from various random government entities attempting to curry favor with the likes of Yellen and Warren who have made it clear they are not fans of the decentralized crypto world's potential 'breaking' of the centralized financial system they rely on, and 2) SEC Chair Gary Gensler is, again relatively speaking, not in favor of any sweeping China-esque crypto ban (and some have argued previously he recognizes its value) even though he has made it clear in the past that there is need for regulation:
“We’ve got a lot of casinos here in the Wild West,” Gensler said.
“And the poker chip is these stablecoins.”
Bitcoin ticked higher on the headline...
While headlines over the coming weeks - as the negotiations begin over exactly how to control these 'poker chips' - are likely to cause volatility, the fact that the SEC is taking it under their wing entirely removes the deep left tail of an outright ban and the liquidity-related chaos that could cause in a hurry.
If cryptocurrencies are to become the backbone of a modern decentralized financial system, then accepting the need for regulation is necessary.