The chairman of the Senate Committee on Banking, Urban Affairs and Housing, Sherrod Brown has reached out to a number of crypto firms and asked for information pertaining to investor and consumer protection on stablecoins. According to the announcement on Tuesday, notices had been sent by the chair to Gemini, Coinbase, Binance.US, Paxos, Centre, Circle, Tether and TrustToken.
Information about stablecoins had been requested and a deadline of December 3rd was issued. This suggested that there was a possibility the chair and some of the other lawmakers could have a hearing on the subject later. According to the senator, it is a possibility that investors may not appreciate the distinct terms, features and complexity of each stablecoin.
He went on to say that crypto platforms do not always provide their users with the same protections that they can get when they are purchasing coins from the issuer.
In the eight letters that were issued, Brown said that he had some significant concerns about the non-standardized terms that are applicable to redemption of some stablecoins because these are very different from traditional assets. Moreover, he added that these terms may not be consistent amongst the various digital asset trading platforms.
The notice asks for basic information regarding the buying, minting and exchanging of stablecoins, along with a number of other coins that are in circulation and how often these tokens are exchanged for US dollars. The notices issued by Brown to Circle, Centre and Coinbase requested information on the USD Coin (USDC), TrustToken was asked about TrueUSD (TUSD), Paxos on Pax Dollar (USDP), Tether on USDT and Gemini on GUSD.
He also added that market conditions should also be defined by the companies in which it would be difficult, if not downright impossible, for the users to exchange the stablecoins for fiat.
This request issued to crypto companies by Brown comes after a report from the Working Group on Financial Markets of the President, which suggest that stablecoin issuers in the US should be subjected to federal oversight in accordance with what is done in the case of banks.
The group added that there was an urgent need for legislation for addressing the risks that are associated with these stablecoins. Previously, the regulators in the United States have already cracked down against stablecoin issuers, such as Bitfinex and Tether, for allegedly not backing all their USDT with reserves all the time.
Both the companies had been ordered to pay the state of New York damages worth $18.5 million and were also told to submit a report of their reserves periodically. After the settlement, it was reported by Tether that majority of its reserves comprised of commercial paper.
The true attraction of stablecoins lies in the fact that they are actually backed by fiat currency. Many risk-averse investors who do not invest in crypto prefer stablecoins for this purpose and discovering that they are not properly backed is undoubtedly a worry for many because this could prove to be risky in the long run.