U.S. Treasury Secretary Yellen believes that quick action should be taken to deal with the stablecoin market

Crypto has received a lot of attention from regulators around the world in recent years. There is increasing discussion about what this sector brings to the global market and the need to regulate it accordingly in order to bring it under the jurisdiction of the law.

On this basis, current U.S. Treasury Secretary Janet Yellen held a meeting with regulators on Monday to discuss the role of stablecoins in the financial sector.

Attendees will include members of the president's Working Group on Financial Markets, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation.

Yellen stressed that it is important for regulators to come together to assess the risks and benefits of stablecoins to the financial system, as they are growing rapidly without clear regulations.

In a statement on Friday, Yellen noted: “Bringing regulators together will allow us to evaluate the potential benefits of stablecoins while mitigating the risks they may pose to users, markets, or the financial system. Given the rapid growth of digital assets, it is imperative that agencies collaborate to regulate and develop recommendations for this sector.”

A CNBC report noted that regulators have for some time expressed concerns about the transparency of stablecoins, the reserves of the underlying assets behind stablecoins, and the extent to which they are relied upon, especially on DeFi-related platforms.

It is worth noting that stablecoins do not seem to have a good reputation in terms of transparency. CryptoWhale said in a tweet that the California financial regulator’s request to relevant parties was responded to, pointing out that there is no document showing that there are corresponding reserves to support USDT and USDC, which are two stablecoins in the top 10 Crypto by market value.

On July 17, CryptoWhale tweeted, “California financial regulators said they have no documentation indicating what Tether is using to back USDT or USDC.

It’s worth noting that this isn’t the first time it’s come under scrutiny. The stablecoin is supposedly pegged 1:1 to the U.S. dollar, essentially a digital dollar that helps provide liquidity and offers a widely accepted token that can facilitate transactions between various cryptocurrencies, sometimes surpassing Bitcoin’s trading volume.

The main concern raised is that while Tether claims it is minting new tokens to meet demand, critics argue that Tether is part of a complex scam that essentially boils down to using the company’s internal currency to buy Bitcoin, with the intended side effect of increasing the price of Bitcoin and otherwise boosting crypto markets.

Regulators’ requirements to audit the reserves of stablecoins and the companies behind them have also not been enforced.

Since stablecoins play a key role in Crypto market liquidity, people expect them to be as transparent as possible. If an investigation finds that this is not the case, the consequences for the Crypto market could be dire.

With over $61 billion worth of USDT in circulation, other cryptocurrencies’ prices would be severely damaged if the allegations against them are true.