Commissioner Hester Peirce — also known as the United States Securities and Exchange Commission’s (SEC) “crypto mom” — has backed a regulatory framework for stablecoins that allows “room for there to be failure.”
Speaking at an online panel on Thursday hosted by financial think-tank the Official Monetary and Financial Institutions Forum (OMFIF), Peirce, who has long been an advocate for crypto, was asked to shed light on the actions being taken by U.S. regulatory bodies in regard to cryptocurrency.
“One place we might see some movement is around stablecoins,” Peirce answered, “that’s an area that has gotten a lot of attention this week:”
“It’s been one area within crypto that’s really had quite a moment and there’s a lot of stablecoin use and therefore people are thinking down the road, if this gets even bigger do we want to have some kind of regulatory framework?”
Peirce said she’s urged the SEC to use its regulatory powers to provide exemptions to particular technologies which she says would allow for important experimentation:
“We need to allow room for there to be failure because that obviously is part of trying new things and our framework really does allow for that kind of trial and error. I hope that we will use it for that purpose.”
The depegging of the algorithmic USD stablecoin TerraUSD (UST) early this week was mentioned by officials in the U.S. Capital with United States Secretary of the Treasury Janet Yellen, saying at a Senate hearing on Tuesday that a “consistent federal framework” on stablecoins needs to be developed in light of the situation.
Two days later, on Thursday, Yellen said that stablecoins de-pegging from the USD was not a threat to the country’s financial stability, as they’re not yet at a scale where a price drop would present a risk. Currently, the market capitalization of the top five USD stablecoins is over $154 billion, or around 11% of the $1.36 trillion total cryptocurrency market cap, according to figures from CoinGecko.
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Speaking further on the regulatory environment for stablecoins, Peirce said that it’s important for regulators to remember that the term covers a variety of assets:
“You might say ‘stablecoin’ and one stablecoin might look nothing like another stablecoin. I think it’s very important to approach all the conversations in crypto with an understanding that there’s a lot of variation which makes it difficult to craft a regulatory framework.”
She added that the regulations “try to cover what exists today” but also “what is going to exist tomorrow […] and that's not easy to do.”