Stablecoins, as the name dictates, are the stable versions of various cryptocurrencies; the term stable here means that their price is more stable as opposed to the volatile nature of their crypto counterparts. These stablecoins are typically pegged to a dedicated cryptocurrency, a commodity, or some other element and have their price stabilized with the help of an algorithm. The US treasury has recently ordered a strict oversight for these stablecoins; Tether is specifically the one that is going to receive the most strict oversight because it proposed great risks, according to a recent analytics report.
The United States treasury has a very keen responsibility, and that is to make sure that investors and traders are able to transfer their money in and out of these tokens. But with stablecoins, there are definitely some concerns that need to be ruled out first. There are some recommendations that are being crafted by the specialists as we speak, and these are expected to come out in the coming weeks.
Supposedly the department is also considering the possibility in case of a flash sale run within the crypto market; what would the endgame be for the cryptocurrencies and stablecoins. Would people buy more of it, dump all of their crypto stashes, or will something unpredictable hit during those unprecedented times? That is why regulations are needed to be worked out as soon as possible, considering the severity of this situation.
Stablecoins Pose A Great Threat To Governments
The Securities and Exchange Commission was asked to prepare a report and then present it before the Senate Banking Committee, the chair of the SEC has indeed labeled many cryptocurrencies, including these stablecoins, as securities. Being securities mean that these commodities require more regulation and strict implementation of policies.
The same concern has been voiced by other members of the Senate in the past that the country should come up with a proper framework to engage with these cryptocurrencies, securities, and stablecoins, or otherwise, it would end up in total chaos, and no one wants that. Despite the fact that these stablecoins enjoy a great market cap, but without the required oversight and regulation, the whole thing would end up in the debris of a fallen building.