U.S. Congress hearing sheds light on challenges of managing stablecoins

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The United States is witnessing a very volatile situation in the management of stablecoins. On 19 April, in a hearing of the U.S. Subcommittee on Digital Assets, Financial Technology, and Inclusion, Austin Campbell shared his views on stablecoins. The Committee discussed the role of stablecoins in the hearing. 

On 14th April, the Financial Services Committee released a Memorandum and informed that the Committee will hold a hearing titled “Understanding Stablecoins” role in payment and the need for legislation. For those who are not aware, the value of another item is used as the benchmark for a group of digital assets called stablecoins, which aim to provide price stability. The most popular stablecoins are currently pegged to the U.S. dollar.  

Some areas like Singapore, Dubai, Abu Dhabi, and the United Kingdom have already implemented provisions to manage stablecoins. According to Austin Campbell, adjunct assistant professor at the Columbia Business School the competition from these areas could affect the United States and push issuers out. He also emphasized that around the world countries have better regulations specifically with fiat-backed stablecoins. Additionally, Campbell said that the United States can do better than these regions. “If we don’t act, those are the best options and people will take advantage of them”, says Austin Campbell. 

A few days back, the United States Financial Services Committee chairman Patrick McHenry released a draft bill on how Congress can manage the stablecoins. It also addresses stablecoins used for payments and a central bank digital currency (CBDC). 

In the hearing, the chair of the Digital Assets Subcommittee, French Hill took a jibe at Patrick McHenry and said, “Like Chair McHenry has repeatedly called it—it’s an ugly baby, make no mistake, but it’s our ugly baby.” He used the phrase “ugly baby” for a proposed bill from September last year presented at yesterday’s hearing.  

The United States has faced setbacks after major stablecoins like Tether and USD coin were temporarily depegged from the dollar due to volatile market situations. There are various other reasons like the collapse of one of the largest cryptocurrency exchanges FTX and Silicon Valley Bank also forced to detach themselves from the dollar. 

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