A senior Republican has sounded the alarm about the fast-growing stablecoin industry, warning that “bad things will happen” to investor money if it’s not regulated soon.
Pat Toomey, the top Republican on the Senate Banking Committee, said he thinks Congress should write new rules for the $180 billion market for stablecoins, one of the world’s most popular cryptocurrencies.
But he resisted some of the tougher measures being promoted by Democrats, who believe stablecoins are now worth so much money that their operators should be regulated like banks.
Toomey told the Financial Times in an interview: “Could many individual consumers get severe burns? Absolutely. Would that be a bad thing? Yes, it would be bad for those consumers. It would also be a major setback for the industry.
“For those two reasons, I want to create a reasonable framework before something bad happens. And let’s face it, some bad things are going to happen eventually – after all, this is still a relatively new technology.”
Stablecoins differ from other cryptocurrencies like Bitcoin or Ethereum in that they are backed by real currency and offer investors the opportunity to own digital assets with the promise of additional price stability.
Financial regulators are concerned about how fast the cryptocurrency is growing, how many are in circulation, and how little clarity there is about the assets backing it.
Tether, the most popular coin, has grown from a market cap of around $4 billion at the start of 2020 to $83 billion now, according to CoinMarketCap. Regulators previously fined the company tens of millions of dollars for misrepresenting its reserves. It currently claims to have enough reserves to cover 100 percent of the coins it issues.
The Biden administration wants to restrict the market so that only nationally regulated financial institutions can issue stablecoins, a rule that would exclude both Tether and USD Coin, the two largest issuers.
However, Toomey’s bill would also allow other organizations to offer the coins if they publicly disclose their reserves every month and undergo an audit every three months.
“The idea that the only eligible issuers should be insured deposit-taking institutions is far too limiting,” Toomey said. “There’s no logical reason in the world why you have to be an insured custodian to do that.”
The move to regulate stablecoins is part of a broader push by Democrats and Republicans to introduce rules for the entire cryptocurrency industry. But Republicans are opposing some of the tougher proposals from senior Democrats like Gary Gensler, chairman of the Securities and Exchange Commission, who has argued that many cryptocurrencies should be regulated in the same way as securities.
Toomey slammed Gensler, saying, “He’s trying to use the tremendous power he has and enforcement action to basically force an industry to do what he wants. This is absolutely not how you deal with a new technology.”
He also criticized Democrats for trying to use the Federal Reserve to accelerate the green energy transition.
Toomey was one of several senators who helped block Sarah Bloom Raskin’s nomination to the Fed’s Board of Governors after she challenged her call for regulators to factor climate change into economic risk considerations.
“There is a movement here in the United States that is using the threat of climate change as an opportunity to begin the process of getting the Fed to divest capital from high-carbon industries to accelerate the transition to a low-carbon economy,” he called. “It makes my head explode.”
He called it a “public conspiracy” by Democrats to curb climate change by means not designed for the task.
Toomey, one of seven Republican senators who voted to convict former President Donald Trump in his second impeachment trial, will retire in November’s midterm elections. The move has sparked a bitter battle for his seat, with the two front runners being TV personality Mehmet Oz and hedge fund boss David McCormick.
Oz is one of more than 100 candidates endorsed by Trump, including JD Vance, the author and venture capitalist who won his hotly contested Ohio Senator race this week.
Despite this victory, however, Toomey insisted that the former president’s influence in the party was waning.
“He’s tried a lot to make sure he picks the horse that’s going to win so later he can take credit for the win that was going to happen anyway and brag about the huge win/loss record,” Toomey said.
“Firstly, he’s not going to win everywhere – I think there are a number of high-profile cases where he’s not likely to pull through. And secondly, people are not stupid. You know, they’ll see what’s going on here.
“I think his influence will continue to wane — which I think is already the case.”
Source: Crypto News Austria