Senate Banking Committee seeks critical information on stablecoins from crypto exchanges

• Senator Sherrod Brown issued letters to crypto exchanges to seek additional information on stablecoins.
• The head of the Senate Banking Committee aims to understand how crypto firms are protecting consumers and investors against risks highlighted in a recent report on stablecoins by the President’s Working Group on Financial Markets.
• Brown also sent letters to major exchanges including Coinbase, Gemini, Paxos, as well as stablecoin issuer Tether.

The head of the United States Senate Banking Committee has requested information from stablecoin issuers and exchanges on how companies are protecting consumers and investors from risks involved in the market.

Senator highlights concerns on stablecoin risks

Senator Sherrod Brown (D-OH) and Chair of the US Senate Committee on Banking, Housing and Urban Affairs is concerned about consumers and investors not fully understanding how stablecoins work and the risks associated with the digital coins. He emphasized that there could be complicated terms and conditions that crypto companies hide in the fine print.

Brown stated that he has significant concerns with the “non-standardized terms applicable to the redemption of particular stablecoins” and how they differ from traditional assets. In his letter to Circle, the payment services company, he further highlighted that the terms may not be consistent across cryptocurrency trading platforms.

The US Senate banking committee head also sent similar letters to digital asset exchanges including Tether, Coinbase, Gemini, Binance.US and Paxos, TrustToken and Centre.

Brown requested the issuers to provide more clarity and explain their processes for minting and redemption of stablecoins and special arrangements they have with crypto exchanges in “straightforward terms.”

The senator refers to the stablecoin report by the President’s Working Group which was released earlier this month, urging legislators to restrict stablecoin issuance to banks. 

In the letter sent to Circle, Brown highlighted that as stablecoins have seen a wider adoption, therefore their importance in effecting digital asset transactions underscores the need for a better understanding of the basic operation and limitations of USDC.

Circle was asked to describe the process of minting which enables customers to acquire USDC for US dollars, the number of tokens issued, and operational conditions that would prevent the redemption of the stablecoin. The digital asset firm has until December 3 to respond to the senator.

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