As things stand today, e-money businesses and stablecoin issuers are regulated at the state level across the United States. However, the U.S. Treasury Under Secretary Nellie Liang recently shared her view that this should change.
Liang argued that all nonbank payment providers, including money transmitters, e-money firms and stablecoin issuers, should be regulated at the federal level. She argued that state regulations hail from the era of physical cash, that money transmitters wouldn’t hold funds for long back then, and that since times have changed, so should the relevant regulations.
Liang underscored how federal rules could help companies involved in these activities in multiple ways. Right now, they must navigate a patchwork quilt of state regulations and apply for multiple licenses. She called this “burdensome and inefficient,” outlining how federal standards would simplify things.
What would those regulations cover? The whole gamut from financial resources to risk management, supervision and the activities these businesses can engage in. For example, e-money issuers would be restricted to payment-related activities so they don’t begin to resemble banks.
How could this change impact Tether and digital currency exchanges?
Tether is the largest stablecoin issuer by market cap, but it has been banned from New York since 2021. Under current regulations, it can continue to operate on U.S. exchanges like Binance, Coinbase (NASDAQ: COIN) and Kraken and serve customers outside New York, but nationwide regulations like those proposed by Liang could change all of that.
Given its well-documented list of questionable practices, the aforementioned ban in New York, and its repeated refusal to prove its reserves, it’s unlikely Tether would get the green light from federal regulators. Given how Liang specifically mentioned that federal standards would cover risk management, the firm’s cloak-and-dagger approach will likely go against it.
With a market cap of almost $120 billion and tens of billions in daily trading volume during bull runs, a federal Tether ban would have drastic implications for the digital currency markets and the prices of tokens like BTC, ETH and other coins that have seen meteoric gains since USDT’s launch.
The Hong Kong-based firm may see the writing on the wall and finally submit to a proper audit, but since several of its high-level executives have been under investigation for bank fraud for several years, it’s unclear whether showing its hand now would help Tether’s cause.
What spells doom for Tether could be a boon for legit companies
Regardless of what it means for Tether, regulation uniformity will likely positively impact legitimate businesses using blockchain technology and digital currencies to create utility.
In addition to increased efficiency and potential cost savings, federal regulation could make it easier to prove compliance, bolster consumer protection, create trust in the industry and lead to more effective risk management, meaning the FTX and UST debacles that have plagued digital currency markets could become a thing of the past.
While some will always rally against any form of regulation, the reality is they already exist, and a uniform set of rules everyone plays by will likely be a net good for the industry and the honest players trying to innovate.
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Source: https://coingeek.com/stablecoin-regulations-eyed-what-does-it-mean-for-tether/