Gary Gensler, the Chairman of America’s Securities and Exchange Commission recently disclosed that digital assets that fall under the category of having being linked to traditional financial instruments might fall under their securities laws.
Speaking to the American Bar Association, Gary Gensler outlined service providers offering crypto-assets “that are priced off” securities and resemble derivatives, in his opinion security-based products, will have to obey the trade reporting rules and other regulatory laws
READ: Tether promises audit in the coming months
“Make no mistake: It doesn’t matter whether it’s a stock token, a stable value token backed by securities, or any other virtual product that provides a synthetic exposure to underlying securities,” he said. “These platforms – whether in the decentralized or centralized finance space – are implicated by the securities laws and must work within our securities regime.”
Though the powerful financial regulator didn’t give out any specifics, his comments highlighted assets like stablecoins that are usually backed by fiat currencies or commercial papers, face regulation amid increased scrutiny around these crypto-assets as stablecoins gain more attention in U.S congressional hearings.
In addition, market experts deliberated on Tether’s opaque operations as regard its reserves, especially on what type of commercial papers back USDT.
READ: Mark Cuban calls for stablecoin regulation after Titan token meltdown
Tether’s most recent breakdown showed that as of the end of Q1 2020, 75% of its reserves were held in cash, its equivalents, commercial paper and short-term deposits. Among that category, commercial paper comprised 65.4%, with cash alone accounting for a meagre amount of 3.87%, leaving experts puzzled on what type of commercial paper was used.
However, its legal counsel, Stuart Hoegner revealed an audit for Tether, the issuer of the largest stablecoin, was months away.
On the flip side, financial auditors working for Circle have revealed the assets backing the company’s USD Coin (USDC) stablecoin. Grant Horton a leading tax advisory firm in its recent attestation report on Circle’s reserves underlined about 61% of USDC’s reserves were held in cash and its equivalents equating to about $13.4 billion as of May 28.
