Treasury report calls for stricter oversight of stablecoins

WASHINGTON (AP) — The Biden administration is calling on Congress to pass legislation that would strengthen government regulation of stablecoins, a form of cryptocurrency that has soared in popularity in the past year.

In a 22-page report issued Monday, the Treasury Department and several other regulators said the legislation should require that stablecoin issuers become banks, which would potentially subject them to a wide range of rules, including those requiring that banks hold sufficient cash reserves and implement measures to prevent money laundering and other illicit activities.

The highly-anticipated report was prepared by an interagency committee known as the President’s Working Group on Financial Markets, led by Treasury, which also includes the Federal Reserve, Securities and Exchange Commission, and Commodity Futures Trading Commission.

“The agencies believe that legislation is urgently needed to comprehensively address the prudential risks posed by payment stablecoin arrangements,” the report said.

Until Congress acts, the working group said that the Financial Stability Oversight Council, a broader collection of financial regulators, could coordinate steps to protect investors and oversee stablecoin issuers' reserves.

“It would force them into the regulatory perimeter, which is the thing that most people think is appropriate,” said Howell Jackson, a financial regulatory expert at Harvard Law School.

Some of those regulators have already taken a tough line, such as SEC Chair Gary Gensler, who has said stablecoins can be used for money-laundering, tax avoidance, and to circumvent U.S. financial sanctions.

Stablecoins are a type of cryptocurrency that is pegged to a specific value, usually the dollar or another currency or gold. By keeping each coin valued...