The digital assets have taken center stage in an intensifying debate over Washington’s role in regulating the crypto industry.
Proponents say stablecoins offer a more reliable store of value than other tokens subject to wild price swings, facilitate trading on crypto exchanges, and could transform payment processing for everyday consumers. Skeptics worry that issuers will fail to maintain sufficient collateral for the assets, posing a risk to the financial system’s stability in the absence of regulation.
Gensler, who has been moving aggressively to impose tougher restrictions on crypto players, questioned whether digital assets will prove an enduring alternative to public currency.
“History tells us that private forms of money don’t last long,” he said, noting the U.S. experimented with private money in the “wildcat banking era” from the 1830s to the 1860s. “This all had a lot of cost, a lot of problems,” he said.
Earlier this month, Coinbase, the nation’s largest cryptocurrency exchange, revealed the SEC had threatened it with a lawsuit if it proceeded with the rollout of a program that would allow stablecoin investors to earn interest on their holdings. The company said investors could earn a 4 percent annual yield by lending their stablecoins to crypto traders — an arrangement the SEC said would subject it to agency’s oversight. On Monday, the company announced it had abandoned the project.
Gensler said the SEC has “robust authorities” under existing law to regulate the crypto sector broadly, “and we’re going to use them.” When it comes to stablecoins, he said, the agency still needs to coordinate with other financial regulators to ensure they aren’t letting any matters fall through the cracks, while also working with Congress “to sort through that.”
Treasury Secretary Janet Yellen convened top financial regulators in July to discuss stablecoins. A report from the group is expected in coming weeks.