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Congress should create new rules for cryptocurrency, regulators says

The Treasury Department said there needs to be more rules for cryptocurrencies

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A dog bowl with coins symbolizing the Dogecoin cryptocurrency.

The Treasury Department said there needs to be more rules for cryptocurrencies.

Alex Cochran

The Treasury Department on Monday issued a report that said federal regulators should earn more power from Congress to regulate stablecoins, a fast-growing form of cryptocurrency.

  • The department said the stablecoins “could result in bank runs, consumer abuse” and other problems unless lawmakers act quickly, The New York Times reports.
  • Per the report, stable coins could transform how Americans pay for things, like haircuts and gasoline, according to CNBC. But they’re not overly regulated right now.

Having regulations could “support faster, more efficient, and more inclusive payments options,” said the President’s Working Group on Financial Markets, which includes President Joe Biden’s financial advisers, according to CNBC.

  • “Moreover,” the report reads, “the transition to broader use of stablecoins as a means of payment could occur rapidly due to network effects or relationships between stablecoins and existing user bases or platforms.”

Stablecoins — which are cryptocurrencies designed to keep their price over time, often pegged to a flat currency, like the dollar — have not always been backed, which is why regulators think they pose a problem to potential customers and the overall financial system.

  • “The rapid growth of stablecoins increases the urgency of this work,” the report said, according to The New York Times. “Failure to act risks growth of payment stablecoins without adequate protection for users, the financial system, and the broader economy.”

Stablecoins often appear as a more viable investment. Per Business Insider, the coins end up being less volatile because they “offer stability within a cryptocurrency system.”

  • “In an ecosystem like cryptocurrencies, where volatility is typically high, this is an important property,” Paul Brody, principal and global blockchain leader at Ernst & Young, told Business Insider. “If you want to take advantage of blockchain technology without exposing yourself to the volatility in crypto prices, this is the way to do it.”