US Treasury to reportedly give SEC significant authority over stablecoins

The United States Treasury Department is reportedly allowing the US Securities & Exchange Commission (SEC) to take the lead in regulating stablecoins including Tether (USDT) and USD Coin (USDC). A highly anticipated report expected to be published later this week will state that the SEC will have significant authority over stablecoins. 

SEC to crack down on stablecoins

The US SEC is ready to crack down on the stablecoin market after the agency won concessions in a debate between regulators in the country over how to regulate the $131 billion market that includes Tether, USD Coin, Binance USD and the Pax Dollar.

According to Bloomberg, a few people familiar with the matter said that the Treasury and other agencies will soon announce that the SEC will have considerable authority over stablecoins. 

The anticipated report will also urge Congress to pass legislation to clarify that these coins should be regulated in the same way as bank deposits. Companies would need to seek licenses under these rules. This approach has garnered support from stablecoin firm Circle, which has plans to become a commercial bank in the future. 

The Commodity Futures Trading Commission (CFTC) will also have a role in overseeing the regulation of stablecoins, according to Bloomberg. 

SEC chairman Gary Gensler lobbied Janet Yellen, the US Secretary of the Treasury and a few members of the President’s Working Group on Financial Markets to allow the securities regulator to set and enforce policies on stablecoins.

Gensler and Federal Reserve Chairman Jerome Powell stated that centralized stablecoins share common qualities with money market funds and therefore should be regulated similarly under the securities watchdog’s purview. 

The SEC chair previously compared stablecoins to “poker chips,” adding that stablecoins are an easy on-ramp to risky investments. 

Tether, the largest stablecoin in the world with a market capitalization of over $70 billion, has faced massive controversy over the assets that back the digital coin. The firm stated that each USDT was backed by one US dollar at the bank, but it was forced to revise its statement after an investigation by the New York Attorney General.