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Odaily Translator | Nian Yin Si Tang

Summary:

Summary:

- Next Monday, U.S. Treasury Secretary Yellen will meet with top regulators to discuss stablecoins.

- Government officials have been expressing concerns about stablecoins, especially Tether.

Stablecoins are increasingly attracting the attention of U.S. regulators. U.S. Treasury Secretary Janet Yellen announced plans to convene the Biden administration’s Presidential Working Group on Financial Markets (PWG), the Office of the Comptroller of the Currency (OCC), and the FDIC as administration officials continue to sound the alarm on stablecoins Discuss interdepartmental work on stablecoins. The group will meet next Monday, July 19th. Yellen said, "Bringing regulators together will allow us to assess the potential benefits of stablecoins while mitigating the risks they may pose to users, markets, or the financial system. Given the rapid growth of digital assets, it is imperative for agencies to discuss issues in this area." The PWG will conduct a review of current regulation of stablecoins, identify risks and make recommendations to address those risks, with written recommendations expected to be issued in the coming months.

Note: The President's Working Group on Financial Markets (PWG) consists of U.S. Treasury Secretary Yellen, U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler, Federal Reserve Chairman Jerome Powell and commodities Rostin Behnam, Acting Chairman of the Futures Trading Commission (CFTC).

A stablecoin is a cryptocurrency that is "pegged" to another currency, usually a physical currency such as the U.S. dollar. The idea is that the value of a stablecoin is aligned with the exact price of the currency it is pegged to maintain "stability". But due to some unpredictable factors in the broader crypto market, this is not always possible in reality. However, stablecoins typically only fluctuate slightly, unlike bitcoin, which can lose 20% of its value on a particularly bad day.

Tether (USDT), a stablecoin pegged to the U.S. dollar, is currently the third-largest cryptocurrency by market capitalization. Many crypto exchanges offer USDT trading markets instead of USD trading markets as a way to avoid dealing with fiat currencies.However, the company behind USDT faces questions about its business practices and whether its peg is actually backed by the U.S. dollar. The company initially claimed that every USDT issued was backed 1:1 by “traditional currency,” which turned out to be not the case. The reality is that Tether is primarilybacked by commercial paper

, or short-term debt from unknown parties.Tether, which has never been fully audited, is also facing legal action as a result. On February 23 this year, the encryption companies Bitfinex and Tether had already negotiated with the New York State Attorney General's Office on the Tether case that began two years ago.reached a settlement

. Bitfinex and Tether pleaded not guilty to any wrongdoing and agreed to pay $18.5 million as part of the settlement. Bitfinex and Tether said they provided more than 2.5 million pages of documents to the New York State Attorney General's Office to settle the matter. As part of the settlement, Tether will voluntarily provide an update on the status of the USDT reserve backing to the New York Attorney General's Office and the public.Then on May 13th, Tether since its launch in 2014first disclosure

details of its reserves. As of March 31, 2021, Tether held reserves comprising nearly 76% of cash and cash equivalents and other short-term deposits and commercial paper. The rest are secured loans, bonds and other investments, including digital currencies such as Bitcoin (Bitcoin only). Specifically, commercial paper made up the bulk of its cash and cash equivalents, accounting for a 65% share. Trust deposits accounted for 24%, reverse repurchase bills accounted for 3.60%, treasury bills accounted for about 3%, and actual cash accounted for only 3.87%.At a recent congressional hearing

, Powell used Tether as an example to explain why stablecoins should be more regulated: “If they (stablecoins) are going to be a big part of the payments space — which we don’t think cryptoassets will be, but stablecoins might be — then We need a proper regulatory framework. But frankly, we don't have one right now."From the data point of view

, The development of stable coins should not be underestimated. On July 14, Messari Research Institute Ryan Watkins tweeted that in the second quarter of 2021, the trading volume of stablecoins reached 1.7 trillion US dollars, an increase of 1090% year-on-year, and an increase of 59% since the first quarter. In addition, in the second quarter, the stablecoin monetary base reached more than 107 billion US dollars, an increase of 70% since the first quarter and an increase of 803% year-on-year. The biggest winners this quarter were USDC, BUSD, and DAI, whose shares grew to 23%, 9%, and 5%, respectively. While USDT is still king, its dominance is fading over time.