Federal officials have expressed concern that the reserves of some stablecoins are invested in assets such as corporate bonds and related securities that could experience severe stress if investors were to lose confidence and attempt to cash in their stablecoins all at once. Powell and Securities and Exchange Commission Chair Gary Gensler have likened the coins to money market funds, which also seek to maintain a value of one dollar but during times of stress have sometimes failed.
The report is expected to recommend banklike regulation for stablecoin providers and for Congress to pass a bill establishing a new, limited type of charter to allow crypto banks to manage stablecoins as deposits, said a senior official involved with the report.
Such regulation could limit what stablecoin providers can do with their reserves, potentially constraining their profits in the name of greater investor protection. Some U.S. stablecoin companies such as Circle and Paxos Trust Company either plan to seek or already have a certain type of bank charter. In contrast, Tether -- the issuer of the largest U.S. dollar stablecoin -- has thus far chosen to try to avoid U.S. regulation and closes its platform to most U.S. customers.
Treasury officials briefed Congressional staffers on their work as recently as last week and said they were targeting the release of their report for the coming weeks, said a person familiar with the briefing.
The Fed would have an “enormous competitive advantage” over private tokens if it launches its own digital dollar, Barclays Plc said in a September research report analyzing the case for a U.S. digital currency.
“Together with regulations, a Fed CBDC could crowd out private issue crypto,” the Barclays report said.
--With assistance from Robert Schmidt.
This article was provided by Bloomberg News.