Washington, Sept 10 (Reuters) - The U.S. Treasury Department quizzed industry participants this week about the risks and benefits of Stablecoins, a type of cryptocurrency whose value is pegged to traditional currencies, according to three people with direct knowledge of the meetings.
Policymakers in Washington are concerned about the rapid growth of the cryptocurrency market, which did not reach a record of $2 trillion until April. According to industry data site CoinMarketCap, the market capitalization of Stablecoins stood at around $125 billion on Friday. This relatively new product does not appear to be subject to any specific financial regulations.
In the coming months, U.S. financial regulators plan to release a number of reports on cryptocurrencies and the risks and opportunities they pose to the traditional U.S. financial system.
Secretary of the Treasury Janet Yellen stated in July that the government needs to move quickly towards a Stablecoin regulatory system.
Treasury officials this week met with financial industry executives to discuss potential Stablecoin regulation, three sources said.
During meetings this week, two people said, officials, asked about direct oversight if Stablecoins became extremely popular during one meeting on Friday. Additionally, they discussed how regulators should reduce the risks of too many people trying to cash in their Stablecoins at the same time, and whether major Stablecoins should be backed by traditional assets.
One of the people also said this was the first time government officials asked how Stablecoins should be structured, how they could be utilized, and if the regulatory framework was adequate.
One of the people mentioned earlier described Treasury officials meeting with banks and credit unions to discuss similar issues during the week. The Treasury officials were only gathering information and did not communicate their thoughts on how Stablecoin regulation should work, this person said.
During this week's meetings, Treasury officials might collect information about Stablecoins that will inform a broader report due in the months ahead.
Treasury spokesman John Rizzo said the department is examining "the potential benefits and risks of Stablecoins for users, markets, or the financial system."
As part of this effort, the Treasury Department is meeting with a wide range of stakeholders, including consumer advocates, members of Congress, and market participants.
Those in Washington worry that the rise of privately-operated currencies will undermine their control over the financial and monetary systems, increase systemic risks, promote financial crime, and hurt investors.
According to reports, the Securities and Exchange Commission, the Commodity Futures Trading Commission, the Federal Reserve, and the Office of the Comptroller of the Currency are also working on cryptocurrency projects.
Source: Reuters