Mnuchin Says Crypto Stablecoins ‘Shouldn’t Be Like Casino Chips’
(Bloomberg) -- With U.S. financial officials poised to to issue a report on stablecoins, former U.S. Treasury Secretary Steven Mnuchin said the cryptocurrencies designed to be pegged to other assets such as the dollar should be regulated and their underlying funds put into banks.
“They shouldn’t be like casino chips,” Mnuchin said Thursday at the Bloomberg Invest Global virtual conference. “If you are going to issue a stablecoin, the actual money should go be held in a regulated bank, in a trust account and the people who hold the stablecoins should be able to exchange those for real dollars at any time.”
Stablecoins are a type of cryptocurrency that, by holding reserves, seek to maintain a fixed exchange-rate with a fiat currency. Bloomberg News reported Thursday that reserves of Tether, the largest such coin with a $69 billion market value, include billions of dollars of short-term loans to large Chinese companies, which is something money-market funds typically avoid.
“Stablecoins should be invested in U.S. Treasuries or things that look like U.S. Treasuries -- money-markets of highly liquid, backed investments,” said Mnuchin.
Led by the Treasury Department, the President’s Working Group on Financial Markets is aiming to issue a report on stablecoins by the end of the month. An expected recommendation is that Congress establish a limited charter allowing new crypto banks to manage stablecoins as deposits, Bloomberg reported earlier, according to a senior official involved with the report who asked not to be identified because it hasn’t been finalized.
In response to a question about investing opportunities, Mnuchin said he likes the payment space -- it’s a “gigantic opportunity,” he said -- and added that blockchain technology was interesting. But, he said, some stablecoins should be regulated. “If they’re backed by dollars, they should be freely transferable and we should make sure that they’re really backed by dollars,” he said.
Regulators have intensified their focus on stablecoins as of late. U.S. officials including Treasury Secretary Janet Yellen, the chair of the Federal Reserve and the head of the Securities and Exchange Commission met over the summer to discuss Tether, which had grown so large that it potentially threatened to put the U.S. financial system at risk. Bloomberg reporting has also shown that U.S. effort to regulate stablecoins favors policing them like lenders, which could jeopardize the future of tokens from firms that refuse to seek federal banking licenses.
Mnuchin has, since his post as U.S. Treasury secretary, returned to investing. His Liberty Strategic Capital has raised about $2.5 billion for private equity investments, with most of the money coming from sovereign wealth funds in the Middle East, Bloomberg News has reported. During Thursday’s panel, he also warned about the risks of breaching the debt ceiling, cautioned on overspending by the Biden administration and voiced concerns that it could further fuel inflation.
In the past, Mnuchin’s been critical of cryptocurrencies. The U.S. Treasury Department under his watch in 2020 proposed new requirements involving convertible virtual currencies that would require greater record-keeping to verify customer identities for certain transactions.
©2021 Bloomberg L.P.