Okay, well stable coins are intended to be stable, right?
Uh That's the whole play on the name here, but in reality that's not the case.
The digital asset which is tied to be up currencies like the US dollar.
I do present a growing risk to finance markets and it's
why the House Financial Services Committee is holding a hearing today
on this topic.
So I do want to bring in cheddar reporter Alex Viola, who is always following
the latest in the crypto space for US Alex. It's good to see you
break down some of the risks surrounding stable coins as they were outlined in
the biden administration's recent report.
Hey Kristin.
So the administration really outlines three big risks and I would say
the most prominent of those is what they call run risk.
This is fairly straightforward. It's what can happen to a bank.
It's when people try to resume or redeem their deposits all at once. You know,
Stable coin issuers say that they're backed 1-1, but that's not really proven
until we have a scenario where everyone's trying to get their money back in dollars.
Uh The other big one is what's called payment systems risk.
And this is really about making sure the plumbing or the mechanisms behind a stable
coin payment systems are running smoothly and that
kind of relates back to the first,
if you try to redeem uh your tether for example, and
for some reason you can't,
well that's a major problem that could
lead to further instability and uncertainty.
And then finally there are risks related to the concentration of economic power.
And basically here the biden administration doesn't want to
see a repeat of what happened to metas de
um where a major commercial company or tech company
tried to roll out its own stable coin.
That could potentially have a huge impact on the economy basically overnight,
uh through what's called network effects, you know,
if everyone is using meta and suddenly they have a payment option,
a lot of people are going to use it and they're gonna use it quickly and
it's very unclear what kind of power that would give a company trying to do that.
Mhm.
What were some sticking points Alex at today's hearing
between lawmakers and the biden administration on its recommendations?
So today the sole witness was undersecretary,
breaking down what the biden administration is speaking and uh is calling for.
And and basically she really stressed this idea that they would
like to see a consistent federal framework for stable coin regulations
rather than a patchwork of state level laws.
Republicans in particular pushed back against this,
urging the federal government to work more closely with states
to sort of defer to them in certain cases
many of them already have what are called money transmitter laws
that they would like to see continued um The other big one, which is really,
I guess sort of the center of this,
of the whole stable coin debate in terms of regulations,
liang doubled down on this proposal that stable coin issuers
should be regulated as insured depository institutions or banks,
a number of lawmakers on both sides of the aisle.
However,
took issue with this saying that given that they don't
lend out money and they don't have fractional reserves,
they should be regulated separately.
Liang said she still sees banking regulation is the best way forward but was open
to the idea of other kinds of regulations if congress were to propose them.
Well Alex based on today's hearing,
do you anticipate that congress is getting any
closer to passing actual legislation around stable coins?
You know what's interesting as I follow these hearings more and more,
you can tell that congress is doing its homework, that they're learning a lot,
that they're developing actual opinions rather than
just having a series of questions.
You can tell listening to the various answers that they came to
this hearing with some ideas about what might need to happen.
There's also a lot less space
between democrats and republicans which could suggest
that a bipartisan law is possible and we are starting to see uh
some draft legislation circulating including one bill from New Jersey rep john got
heimer which takes many of the regulations from the biden administration report.
We're also leaving room for stable core issues to be regulated
separately from banks if they meet certain criteria around oversight,
transparency and reserves requirements.
Overall,
it's very clear that stable coins at least if we're talking about
crypto concerns are definitely at the top of the docket for Congress.
So we'll be keeping our eyes peeled for legislation in the near term.
Okay. We will be following it closely. Cheddar reporter Alex Viola.
Thank you as always.