The US Congress should give the Commodity Futures Trading Commission more powers to police cryptocurrency stablecoins to reduce risks to the financial system, Securities and Exchange Commission Chair Gary Gensler said on Friday.
Stablecoins are usually pegged to the US dollar and are primarily used to facilitate trading in other digital assets.
With around $150 billion in market capitalization, stablecoins have many similarities to money market funds, and need to be regulated accordingly, Gensler said at a conference held by Georgetown University’s Psaros Center for Financial Markets and Policy in Washington.
While the CFTC has anti-fraud and anti-manipulation regulatory authorities over firms that issue dollar-backed stablecoins, they do not have “actual plenary authority to write rules around the exchanges,” Gensler said.
“I think the CFTC could have greater authorities. They currently do not have direct regulatory authorities over the underlying non-security tokens,” he said.
The vast majority of cryptocurrencies, including so-called algorithmic stablecoins, are securities, and fall under the SEC’s authority, while a handful are not, Gensler said.
In March, TerraUSD, an algorithm-based, rather than asset-pegged, stablecoin, blew up spectacularly, pushing another major stablecoin, Tether, below its dollar peg and sending ripples through the global cryptocurrency market.
The Financial Stability Oversight Council, a US regulatory panel comprising top financial regulators, earlier this month recommended that Congress pass legislation addressing the risks digital assets pose to the financial system, including bills to bolster oversight of crypto spot markets and stablecoins.
It remains unclear when Congress might pass crypto-related legislation, although several bills have been introduced to address stablecoins and digital commodities regulation.