Treasury Official Tells Senate Hearing Stablecoin Regulation Should be ‘Clear and Consistent’

Sen. Sherrod Brown (D-Ohio), chairman of the Senate Committee on Banking, Housing and Urban Affairs, said in a meeting recently that there should be more regulation behind things like stablecoins.

According to a transcription of the meeting Tuesday (Feb. 15), Brown said cryptocurrency and related developments have been creeping into daily life. One example was the Super Bowl, which saw numerous ads for crypto exchanges.

“If you watched the Super Bowl on Sunday, you saw ad after ad for a product that most Americans have heard of, but almost nobody knows what it is,” he said. “Even many of the people who’ve bought it often don’t really understand it. Big crypto companies are looking to make big profits, and are desperate to reach as many Americans as they can. They brought in celebrities and gimmicks to make crypto sound exciting and daring and profitable.”

Brown said companies should look deeper into the promises of stablecoins, including that it’s backed by real dollars that make it “stable.” He added that regulators tested the claim and that one issuer ended up paying almost $60 million due to lying about its reserves — the coin had only been “backed” 28% of the time.

He said while companies have been saying a user can redeem a stablecoin any time, there’s often fine print establishing that ordinary customers can’t just redeem stablecoins — only hedge funds or other such places can.

“So, if you saw a Super Bowl ad and figured you’d give this a try, and you change your mind and want to exchange your stablecoin for dollars, you might be out of luck,” he said. “The website could be down. Your money could be trapped.”

Meanwhile, Sen. Patrick J. Toomey (R-Pa.) said in his own statement that he wanted to see something different than stablecoins limited to insured depository institutions. Instead, he said there should be regulation that is flexible and allows for future innovating.

PYMNTS wrote recently that the Federal Deposit Insurance Corp. (FDIC) has named stablecoins as a priority to look into the risks.

See also: FDIC Chair Calls Stablecoins a Top Concern as NY Fed Calls Them Unnecessary

Government agencies have been pushing for greater regulations on crypto and have shown signs they plan on digging more into the “nuts and bolts” of how to get ahead of the burgeoning sector.