The Financial Stability Oversight Council (FSOC) plans to identify regulatory gaps on digital assets and recommend ways to plug them next month, as the final part of a long-awaited federal framework for U.S. digital asset policy, according to senior Biden administration officials.
The report will discuss financial-stability risks of digital assets, identify related areas for additional regulation, and make recommendations to foster financial stability, according to a fact sheet provided by the administration.
In addition to beefing up federal crypto policy coordination, the administration also wants to pursue global leadership in digital asset policy, across different international organizations.
"U.S. agencies will also continue and expand their leadership roles on digital assets work at international organizations and standard setting bodies," including the G7 and Organisation for Economic Co-Operation and Development, an administration summary document said. "Agencies will promote standards, regulations, and frameworks that reflect values like data privacy, free and efficient markets, financial stability, consumer protection, robust law enforcement, and environmental sustainability," in those international forums.
Domestically, the administration cited stablecoin concerns and the wider market fallout that occurred due to the collapse of popular stablecoin project Terra/Luna as a major area for FSOC to address.
"Stablecoins, in particular, could create disruptive runs if not paired with appropriate regulation," said fact sheet. "The potential for instability was illustrated in May 2022 by the crash of the so-called stablecoin TerraUSD and the subsequent wave of insolvencies that erased nearly $600 billion in wealth."
FSOC published a separate report on stablecoins in December of 2021, at which time it said it would consider taking action if Congress did not pass a framework. During a background press briefing on Thursday, Biden administration officials told journalists that none of the reports published Friday included recommendations for congressional action. But it was not clear if FSOC's new report would also steer clear of asking Congress to pass new laws.
When asked to clarify if the still-pending FSOC report would include legislative proposals, a Treasury spokesperson declined to comment.
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