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U.S. Treasury to issue ‘stablecoin’ report, paving way for new rules

By Pete Schroeder and Michelle Price

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U.S. Treasury to issue 'stablecoin' report, paving way for new rules
© Reuters. FILE PHOTO: The Federal Reserve building is seen in Washington, U.S., October 20, 2021. REUTERS/Joshua Roberts/File Photo

By Pete Schroeder and Michelle Price

WASHINGTON (Reuters) – A U.S. Treasury Department-led panel is set on Monday to release a hotly-awaited report on stablecoins, a fast-growing type of digital coin pegged to traditional currencies, according to an administration official with knowledge of the matter.

The report by the President’s Working Group on Financial Markets will explore the risks and opportunities offered by stablecoins, a roughly $131 billion market, paving the way for future regulatory and potential congressional action.

Policymakers worry the boom in privately-operated cryptocurrencies could undermine their control of the financial and monetary systems, increase risks, promote financial crime, and hurt investors. It remains unclear, however, which financial rules and agencies apply to these relatively new products.

Treasury Secretary Janet Yellen has said the government must quickly establish a regulatory framework for stablecoins, and Monday’s report is expected to help provide a blueprint as well as assert which regulators may already have jurisdiction.

“In terms of the substance of the report, we expect a fair framing of the benefits (e.g., faster/cheaper payments, financial inclusion) with potential drawbacks (e.g., risk of runs leading to fire sales of reserve assets) as well as a number of policy recommendations,” Isaac Boltansky, director of policy research for brokerage BTIG, wrote in a note 

The President’s Working Group (PWG) has been researching stablecoins for the past few months, including through meetings with a range of financial industry participants, consumer groups and members of Congress, Reuters reported https://www.reuters.com/technology/exclusive-us-treasury-financial-industry-discuss-cryptocurrency-stablecoins-2021-09-10 in September.

Those discussions covered the potential uses of stablecoins for payments, their risks to users, and the financial system and whether some stablecoins would merit direct oversight.

They also explored how regulators should try to mitigate the risks of too many people trying to cash in their stablecoins at the same time, and whether major stablecoins should be backed by traditional assets.

The PWG traditionally includes the Treasury, Federal Reserve, Securities and Exchange Commission and the Commodity Futures Trading Commission, but the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency are also involved.

Traditional financial firms have called for stiffer rules for cryptoassets, which threaten their businesses, but have also said policymakers should allow responsible innovation.

“The payments industry values predictability and legal certainty. As such, we are looking for the PWG to recommend a regulatory framework that achieves these two goals, while still encouraging continued innovation and protecting consumers,” said Scott Talbott, a senior vice president at the Electronic Transactions Association in Washington.

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Goldman Sachs stock forecasts: Goldman has downgraded its recommendation for global stocks for the next 3 months to “below market

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Goldman Sachs stock forecasts

A new Goldman Sachs stock forecast has emerged. Analysts at U.S. bank Goldman Sachs Group Inc. (NYSE:GS) have downgraded their recommendation for global stocks for the next three months to “below market” and maintained an “above market” recommendation for cash amid recessionary risks, Bloomberg writes.

“Current stock valuations may not fully reflect the risks involved, and there’s a chance they will drop even further before they bottom out. Also have a disappointing Goldman Sachs economic forecast,” the Goldman strategist team, led by Christian Muller-Glissmann, wrote.

BlackRock, the world’s largest company by assets under management, advises investors to “divest from most stocks.”

Experts at Morgan Stanley (NYSE:MS) and JPMorgan Asset Management previously laid out similar concerns after the world’s top central banks signaled their firm’s resolve to fight inflation, sending global stocks plunging in the past few days.

Goldman analysts last week sharply lowered their forecast for the value of the U.S. S&P 500 stock index for the end of this year, to 3,600 points from the previously expected 4,300 points. The day before, the indicator finished trading at 3655 points.

Earlier, we reported that European stock markets are trading contradictoryly.

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European stock markets are trading contradictory today

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biggest european stock markets

During today’s trading the major European stock markets do not show unified dynamics. The composite index of the largest companies in the region, Stoxx Europe 600, decreased by 0.18% to 389.68 points.

European stock markets trading today

British stock index FTSE 100 was down 0.06%, while German DAX gained 0.19% and French CAC 40 gained 0.16%. Italian FTSE MIB rose by 1%. Spanish IBEX 35 decreased by 0.34%.

The British financial company Virgin Money UK PLC was among the leaders of the fall in the components of the Stoxx Europe 600 index, falling by 6.7%.

Shares of the Swiss manufacturer of heating and ventilation systems rose 8.4% as Berenberg’s experts improved their recommendations on the company’s securities and raised their price target.

Concerns about the state of the global economy are growing amid persistently high inflation and aggressive measures by major central banks to curb it, writes CNBC.

The elections in Italy are also in the spotlight. The Italian Democratic Party acknowledged defeat in early parliamentary elections that took place on Sunday, reported the media.

The market is also pressed by continuing geopolitical tensions with the ongoing “referendums” in several regions of Ukraine.

Meanwhile, the level of business confidence in the German economy in September fell to 84.3 points from 88.6 points in August, according to a report by the research organization IFO.

Earlier we reported that the yield of British government bonds rose to a 14-year high.

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Yield of British government bonds during recession rises to 14-year high

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yield on government bonds

Yield of British government bonds during the recession is rising today amid expectations that the Bank of England will have to raise rates sharply as a major fiscal stimulus announced by the government last week will lead to a further rise in inflation.

The interest rate on U.K. ten-year government bonds rose to 4.246% p.a. during trading, which, according to Refinitiv, is the highest since 2008.

Yield on government bonds

The yield on ten-year bonds was 4.087% compared to 3.827% at market close on September 23; the yield on two-year government bonds rose to 4.418% from 3.911%.

Last Friday, Britain’s Finance Minister Kwasi Kwarteng announced a massive tax cut that will affect individuals and businesses and increase the budget deficit this fiscal year by more than 70 billion pounds.

The stimulus measures of the new British government will require an increase in government bond issuance, which is one of the factors pushing down their prices. Rising rates could exacerbate difficulties in the economy by reducing disposable income and leading to a rise in the cost of mortgages.

Earlier we reported that investors in the U.S. are buying a record number of risk insurance contracts amid a sell-off.

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