US Treasury Wants Regulators to Watch for ‘Potential Risks’ in Digital Asset Innovation

US Treasury Wants Regulators to Watch for ‘Potential Risks’ in Digital Asset Innovation
(David Kay/Shutterstock)

The U.S. Treasury Department wants state and federal regulators to keep a vigilant watch on digital asset innovation.

According to released on Thursday by the Financial Stability Oversight Council, digital assets are a “particularly good example” of both benefits and potential risks associated with innovation.

The report highlighted the ambitions by nations around the world in their experiments with central bank digital currencies (CBDC) as a way to “enhance the global standing of their own currencies and enable faster payments.”

“Financial Innovation offers considerable benefits to consumers,” the report reads. However, the report also noted that should stablecoins become widely adopted as a form of payment it could upset the balance of the current financial system, warranting “greater regulatory scrutiny.”

The Council is charged with identifying risks to the financial stability of the U.S. and encourages market discipline while responding to threats facing the U.S. financial system. The council is comprised of 10 voting members and five nonvoting members who amalgamate expertise of federal financial regulators, state regulators and an independent insurance expert appointed by the U.S. president, according to the .

E-commerce companies providing financial services, such as Square (SQ) and PayPal (PYPL) , could increasingly seek to compete directly with incumbent financial service providers. “Their market presence could grow significantly,” according to the report. That these companies are not regulated in the same way “incumbent financial service providers are required to comply” is a matter of concern, the council said.

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