WASHINGTON — Key policymakers on the Senate Banking Committee and the Biden administration called for the rapid development of legislation to better regulate stablecoins on Tuesday, suggesting that a new law could emerge before the end of the year.
Treasury Secretary Janet Yellen appeared before the Senate Banking Committee Tuesday to talk about the work of the Financial Stability Oversight Council, but the hearing quickly zeroed in on stablecoins — a type of digital asset that typically tries to maintain a steady value by pegging itself to a fiat currency — as a key focus of concern.
Senators of both parties, including Sens. Pat Toomey, R-Pa., and Catherine Cortez Masto, D-Nev., said it was urgent that Congress quickly introduce oversight to the stablecoin sector. Yellen agreed, saying she would work with lawmakers to craft legislation as quickly as possible.
Yellen pointed to a recent implosion in the stablecoin market — the
TerraUSD’s volatility “simply illustrates that this is a rapidly growing product, and there are risks to financial stability, and we need a framework,” Yellen said.
Toomey, who introduced a
“The outstanding stock of stablecoins is growing at a very rapid rate, and we really need a consistent federal framework,” Yellen said, adding that she would “look forward to working with you, with members of Congress, to devise legislation that would accomplish that.”
Elsewhere during Tuesday’s hearing, lawmakers battled over the authorities and purview of the FSOC; Republicans continued to criticize the intergovernmental body for its attention to the financial stability risks of climate change.
Toomey blasted Yellen for the FSOC’s recent focus on climate risk, rather than cybersecurity risk, arguing that the latter was a more immediate and dire threat. “You're choosing not to acknowledge that cybersecurity is a more imminent risk than climate risk," Toomey said, “and I think that's kind of surprising, because it's so obvious to most people.”
Yellen responded by saying that climate change remains “an existential threat to our globe and to our future.” Later, in response to similar questions from Sen. Steve Daines, R-Mont., Yellen denied that the FSOC was downplaying the threat of cybersecurity to the financial system in favor of climate change.
“Cyber is a critical risk,” Yellen said.
Meanwhile, Sen. Elizabeth Warren, D-Mass., urged Yellen to reclaim the FSOC’s ability to designate companies as systemically important financial institutions, or SIFIs. The Trump administration
Asked by Warren whether she would seek to restore the FSOC’s ability to designate institutions as sources of systemic financial risk, Yellen originally demurred, saying that the Treasury Department was “looking at this very carefully and examining what our options are.”
Warren continued to press Yellen on the matter, quoting the Treasury secretary’s past criticism of the Trump administration’s decision to undercut the oversight committee’s ability to designate firms as SIFIs. Yellen eventually said that regulators needed “both tools” — apparently referring to institutional designations and activities-based designations of systemic risk.
