On November 1st, 2021, the President’s Working Group on Financial Markets (PWG) released a report on stablecoins, highlighting their tremendous benefits and potential risks. To put this report into context, Chainalysis’ Head of Public Policy Salman Banaei led a two-part discussion with senior U.S. Treasury official Matt Swinehart and two members of Congress—Jim Himes (D) (CT-4) and Tom Emmer (R) (MN-6).

Below, we’ve summarized the key takeaways.

The Treasury’s perspective on stablecoins

In part one of the discussion, Matt Swinehart, Acting Deputy Assistant Secretary of the Treasury for International Financial Markets, provided an overview of the stablecoin landscape, its risks, and PWG’s recommended response.

The use-cases of stablecoins

The report discussed the uses of stablecoins under two headers:

  1. Digital asset trading. “Stablecoins today are primarily used to facilitate the trading, lending, and borrowing of other digital assets.” Many crypto exchanges and DeFi protocols utilize stablecoins, rather than integrations with traditional banks, to support trading.
  2. Payments. Proponents believe that stablecoins could become widely used by households and businesses as a means of payment and cross-border remittances. Compared to existing modes of such payments, stablecoins offer faster and cheaper transactions with less exchange rate risks.

“The United States strongly supports responsible innovation,” Swinehart explained. “If well designed and appropriately regulated, stablecoins could contribute to important payment system objectives, like efficiency, resiliency, and inclusion.” But there are, of course, risks.

Stablecoin risks

The report went on to describe several customer protection and market integrity concerns associated with stablecoins:

Legislative recommendations

To allay these concerns, the report recommends that Congress enact legislation that would: