US Financial Regulators Warns: Stablecoin Adoption Poses Systemic Risks To The Economy
Just recently, the Financial Stability Oversight Council (FSOC) issued a report to the public citing the problems resulting from the growing stablecoin adoption. The FSOC is a United States federal government organization which was signed into law in July 2010 by President Barack Obama. Barely a month ago the U.S. Federal Reserve issued a warning that without proper regulations and safeguards, continued use of stablecoins like Bitcoin could pave the way for crime, terrorism financing and money laundering.
The FSOC’s report said that it recommends state regulators continue examining risks to the financial system posed by the use of digital assets and distributed ledger technologies (DLT). Various parties and officials, however, seem to have contrasting views concerning stablecoins. Treasury Secretary Steven Mnuchin along with US President Donald J. Trump have stood their ground and warned of a number of risks rising from stablecoins and cryptocurrencies. On the other hand, other officials like the ex-CTFC Chair Christopher Giancarlo believe that crypto adoption is the new age and turning a blind eye will make them fall behind in the new technology evolution.
Uncertainty Lingers Over Crypto
The FSOC explained that trading data via cryptocurrency was very unreliable since the panel was unable to understand the whole phenomena and how it operated. Apart from Bitcoin and other cryptocurrencies, the platform also bashed critics on Distributed Ledger Technologies, a project related to Bitcoin. Distributed Ledger Technologies is a term used to describe technologies which store, distribute and facilitate the exchange of value between crypto users, either privately or publicly. Blockchain was the first fully functional Distributed Ledger Technology.
The Financial Stability Oversight Council stated that as much as crypto has taken over in waves in recent times, applications in the financial sector have not yet hit the expected standards and still remain uncertain. In their report they cited various risks to consumers and businesses dealing in crypto. Among the risks were market price instability, cybersecurity risks and risks to international monetary and payment systems integrity.
The public has been urged to remain cautious when dealing with stablecoins as various critics and U.S lawmakers continue to focus on the risks stemming from the cryptocurrency sector.