Previously, Janet Yellen, U.S. Treasury Secretary, meet regulators to discuss stable coins. Yellen previously stated, “Bringing together regulators will enable us to assess the potential benefits of stablecoins while mitigating risks.”

While Yellen in the past held an anti-cryptocurrency stance pointing to its use in criminal activity, she has also acknowledged that digital currency has the potential to improve the financial system. However, regulations will not change pro-digital currency too quickly as governments are horrified about the cryptocurrency economy becoming powerful. Regulatory restrictions are slowly making their way into the stablecoin ecosystem.

Rumors are doing the rounds about Treasury Reports on Stable Coins soon coming. The risk associated with stable coins per the report is about the inability to redeem stablecoins for their underlying assets.

This was highly expected for quite a long time.  Stablecoin regulation in the United States has been happening at the state level.  It is expected that the Treasury report will bring in a framework for a new federal approach to the industry.

Fiat-backed stablecoins, and particularly those which are related to the value of the U.S. dollar, are the most traded on the market. There are increased concerns about the nature of their actual backing, and on how they are used to manipulate the market.

The Financial Stability Oversight Council might consider launching an investigation about the threats related to stable coins. Government bodies might come up with stricter rules around stable coins and cryptocurrencies. It is important for investors to be able to move their money in and out of tokens comfortably, whether through centralized or decentralized exchanges.

In the event of a market sell-off, it can be difficult for stable coins if they are not sufficiently backed up, leading to financial instability. There are some stable coins, which are reportedly outpacing national cryptocurrencies. Governments are worried about tech-giant’s backed stable coins in the market. Worries about stable coins posing an economic threat is brewing. There is a widespread anticipation about regulatory decisions related to stable coins, as several stable coin providers have been facing regulatory pressure.

Tether and the actuality of the backing has been long in debate. Probable Misconduct of the company in the early years bought the executives under investigation.

Stablecoin providers are coming under scrutiny for one reason or the other.  Coinbase is also getting questioned about their backing. And, they have been updating their cash equivalents in the backing. Regulators are trying to catch hold of the issues related to stable coins before they become widely adopted.