A top US Securities and Exchange Commission official said on Thursday that stricter rules around stable coins could be closer to the end of the day.
The collapse of the stable coin TerraUSD and the plunge in Tether, currently the world's largest stable coin by market cap have resulted in a total value of around $1 trillion this week.
Stable coins are digital currencies whose values are pegged to traditional assets like the dollar.
There is a possibility that there is a movement around stable coins due to tighter regulations, according to SEC Commissioner Hester Peirce, who spoke about the policy think tank of the London-based Official Monetary and Financial Institutions Forum.
That's an area that has gotten a lot of attention this week, underscoring the potential that stable coins can have future use in the marketplace builds, said Peirce.
She said that the SEC has the opportunity to capture digital currency, and the technology platforms where they are traded, under the agency's broad rulemaking authority.
U.S. Treasury Secretary Janet Yellen told a Senate banking panel this week that the turmoil in the criptocurrency markets illustrated the need for an appropriate regulatory framework.
In March, President Joe Biden issued an executive order requiring the government to assess the risks and benefits of creating a central bank digital dollar, as well as other issues related to cryptocurrencies.
The chair of the SEC, Gary Gensler, said that the agency should address stable coin risks as the asset-linked cryptocurrencies raise concerns about financial stability and monetary policy around features that are similar to bank deposits and money market funds.
There are issues on their potential use for illegal activity, he said.
But on Thursday, Peirce, the SEC's lone Republican commissioner, said potential regulation should make room for a trial-and- error regulatory framework, saying that some people have suggested that should be at the SEC, while others want it to be the banking regulators.
There are different options for approaching stable coin. We need to allow room for there to be failure with experimentation.