United States regulators are increasingly becoming involved with cryptocurrencies as the market continues to grow and evolve.
The chairman of the United States Federal Deposit Insurance Corporation (FDIC) has revealed that the agency is working to create clear guidance regarding the intersection between cryptocurrencies and the American banking world.
FDIC chair Jelena McWilliams, while speaking at the Money 20/20 conference in Las Vegas, said the agency is working to create clear guidance for banks on how they can get involved with cryptocurrencies. She stated that with clear regulations, banks should be allowed to hold cryptocurrencies.
The FDIC head said, “My objective is to provide clear guidance to the public on how our existing rules and policies apply to crypto assets, what types of activities are permissible for banks to engage in, and what supervisory expectations we have for banks that do engage in such activities. We plan to issue a series of policy statements in the coming months.”
McWilliams also talked about the rise of stablecoins in the United States and other parts of the world. According to the FDIC chair, stablecoins offer numerous benefits, including a faster, cheaper, more efficient mechanism for sending money across the globe.
The integration of smart contracts with stablecoins also makes it more efficient in debt repayment. However, she added that stablecoins also present certain risks, especially if one or more of them were to become the global reserve currency.
A stablecoin becoming a global reserve currency could see huge amounts of money migrate out of insured banks, leading to negative effects in terms of credit creation, financial stability, and bank funding. As a result, McWilliams called for greater effort in regulating the stablecoin market.
By regulating the activities of stablecoin issuers, the FDIC chair believes there would be better safety for people’s money as it would ensure that the coins are truly pegged 1:1 to the US Dollar or other fiat currencies.
The United States government has focused on regulating the stablecoin market due to the threat it poses to the US dollar. The Biden administration is considering applying banking regulation to the stablecoin sector.