Regulators are reportedly sounding the alarm over stablecoins, fearing they are poorly understood and could be used to launder money
- Government recently warned stablecoin makers that many consumers don't get that the tokens could lose them money, Bloomberg reported Wednesday.
- Regulators also fear
stablecoinscould be used to sidestep the formal banking system, letting criminals launder money with impunity.
- The shakiness of stablecoins poses a problem for
According to a report from Bloomberg, officials in the Biden administration recently warned stablecoin makers that many consumers are not aware that the dollar-linked tokens are not federally insured and could result in losses on their investments.
TOP VIDEOS FOR YOUThe report, citing a person familiar with the matter, says regulators also fear stablecoins could be used to sidestep the formal banking system, letting criminals launder money with impunity.
AdvertisementScrutiny of stablecoins has been building for months, even as the
In a speech last month, Fed Governor Lael Brainard echoed the worries aired in the Bloomberg report, noting that stablecoins - essentially a form of privately issued money - introduce the risk that the private issuer defaults. That could harm consumers and destabilize the financial system, Brainard said.
Stablecoins, which are in principle backed one-to-one by US dollars, have often appeared wobbly. In February, New York Attorney General Letitia James banned New Yorkers from trading in Tether, the market's largest stablecoin, after an investigation revealed
In a statement to Bloomberg, Tether said the company "embraces transparency and regulation" and was not presently accepting US customers.
The shakiness of stablecoins poses a problem for crypto more broadly. Because stablecoins provide an easy way for traders to move between crypto and dollars, they have become a key source of liquidity to the crypto market - notwithstanding their imperfect pegs to the dollar.
Crypto-related money laundering fears were reinforced earlier this month when a UK financial regulator warned a "significantly high" number of crypto firms were not adhering to anti-money laundering requirements.
AdvertisementFor a more in-depth discussion, come on over to Business Insider Cryptosphere — a forum where users can deep dive into all things crypto, engage in interesting discussions and stay ahead of the curve.
India is reportedly mulling over a new crypto tax which could make trading on foreign exchanges more expensive
There’s a new Indian crypto lobby in the making and Zebpay has confirmed its participation
Investments in crypto hit a new record of $17 billion, but Indian funds are yet to jump on the bandwagon
- Chemplast Sanmar to raise ₹3,850 crore through IPO starting from August 10
- Dominos India and Osho Jain create a music video together to urge citizens to get vaccinated
- IPO-bound ixigo acquires bus ticketing platform AbhiBus to strengthen its footprint
- Best earphones with heavy bass in India
- With 9.8% growth in H1 2021 revenues, WPP says it has returned to 2019 levels a year ahead of plan