U.S. officials are discussing launching a formal review into whether Tether and other stablecoins threaten financial stability, scrutiny that could lead to dramatically ramped-up oversight for a fast-growing corner of the crypto market.
After weeks of deliberations, the Treasury Department and other federal agencies are nearing a decision on whether to launch an examination by the Financial Stability Oversight Council, said three people familiar with the matter who asked not to be named in commenting on closed-door discussions. FSOC has the power to deem companies or activities a systemic threat to the financial system — a label that typically sets off tough rules and aggressive monitoring by regulators.
Such a designation would likely be a gamechanger for stablecoins, which are considered crucial to the crypto market because traders widely use them to buy Bitcoin and other virtual currencies.
Stablecoins have thrived in the unregulated shadows, with tokens in circulation now worth more than $120 billion, according to CoinMarketCap.com. And they are increasingly being used for transactions that resemble traditional financial products — like bank savings accounts — without offering anywhere near the same level of consumer protections.