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Dec 18, 2021
FSOC Says: We Aspire to Ease Stable Coin Risks if Congress Doesn't
The Financial Stability Oversight Committee (FSOC) concluded its 2021 report stating that they aspire to ease stable coin risks. The annual report proposes, "Federal and state actuators will continue to pursue digital assets for inherent risks associated with the financial system."
FSOC to Ease Stablecoin Risks
The Committee analyzed the latest released President's Working Group report on stable coins. This report highlights the possible risks the tokens might have over the financial system. The report even includes an examination of stable coin reserves and the absence of clarity associated with issuers' reserves.
The PWG appealed to Congress to limit stable coin disbursement to insured depository institutions, primarily banks. FSOC proposed, "Our member agencies; confining major financial regulators; chaired by Treasury Secretary Janet Yellen, will contemplate the PWG recommendations. And, if Congress falls short of action, we're prepared to take steps to modulate the risks of stablecoins."
"The Council will even be ready to take steps available for addressing risks," as summarized in the PWG Report on Stablecoins. In more general terms, it has asked regulators to collaborate and coordinate where their authority intersects; during matters related to digital assets. Regarding the usability of other digital assets, FSOC said, "There's a limit to using other digital assets as an investment instrument."
Digital Assets Might Not be Appropriate
The Committee claimed, "Digital assets might not be appropriate for many investors because of their inconstant price action." As per the report, "It seems that the surmise will operate the majority of digital asset activity. Anyways, owing to the improvised nature of major transactions, it's not clear what percentage of transactions may directly tie to economic activity."
The report also highlighted the decentralized finance (Defi) space, which has been evolving because regulators resist diverse levels of decentralization in protocols. The report showcased several risks, such as market value fluctuation, operational issues, and cybersecurity risks.
Disclaimer: The views and opinions expressed in this article are for informational purposes only and do not constitute financial, investment, or other advice. Investing in or trading crypto assets comes with a risk of financial loss.
Gitumani is a blockchain enthusiast as she keeps a tab on the recent happenings pertaining to the crypto industry. She aims to provide quality content in blockchain and crypto domain. She is a financial content writer too and has worked on several financial projects related to the stock market news, fundamental research, and technical analysis for several websites.