US officials are discussing launching a formal review into whether Tether and other stablecoins threaten financial stability, scrutiny that could lead to dramatically ramped-up oversight for a fast-growing corner of the crypto market.
After weeks of deliberations, the Treasury Department and other federal agencies are nearing a decision on whether to launch an examination by the Financial Stability Oversight Council (FSOC), according to sources. FSOC has the power to deem companies or activities a systemic threat to the financial system – a label that typically sets off tough rules and aggressive monitoring by regulators.
Such a designation would probably be a gamechanger for stablecoins, which are considered crucial to the crypto market because traders widely use them to buy Bitcoin and other virtual currencies.
Stablecoins have thrived in the unregulated shadows, with tokens in circulation now worth more than $120 billion, according to CoinMarketCap.com. And they are increasingly being used for transactions that resemble traditional financial products – like bank savings accounts – without offering anywhere near the same level of consumer protections.
A hallmark of stablecoins is that they are pegged to fiat currencies, meaning they are supposed to be immune to the wild price swings that have plagued Bitcoin. Tether and other firms achieve that by backing their tokens with assets like US dollars and corporate debt.
The President’s Working Group on Financial Markets, which is led by Treasury Secretary Janet Yellen, has been particularly focused on Tether’s claims that it holds massive amounts of commercial paper – debt issued by companies to meet their short-term funding needs. In a private meeting US officials held in July, they likened the situation to an unregulated money-market mutual fund that could be susceptible to chaotic investor runs if cryptocurrencies plunge.
The President’s Working Group plans to issue stablecoin recommendations by December and a consensus is building among regulators involved that an FSOC review is warranted, sources said. The groups overlap, as Ms Yellen, Federal Reserve chairman Jerome Powell and Securities and Exchange Commission chairman Gary Gensler are members of both the PWG and oversight council.
A Treasury spokesman declined to comment.
The FSOC process includes a lengthy study and an assessment of which federal agencies should respond and how. In the end, the council could direct those agencies to intervene in the market and reduce the dangers posed by stablecoin transactions.
While Tether is the most popular stablecoin, there are multiple rivals, including Coinbase Global’s USDC token and a dollar-linked offering from Binance Holdings.
Scrutiny has been ratcheting up as stablecoins proliferate. Coinbase made headlines this week by disclosing the SEC had threatened to sue if the crypto exchange launched a product that would allow customers to earn 4 per cent yields for lending out their USDCs to other traders. The SEC believes the Coinbase proposal is an investment contract that should be registered with the agency, a view the company aggressively contested in a blog post and a series of tweets.
Watchdogs have also privately expressed worries about Diem, a stablecoin being developed by an association that includes Facebook. A top concern is that the token’s market impact could be massive because of its potential for widespread adoption – Facebook’s social media network has almost three billion active users.
Treasury held meetings this week with industry representatives to ask them about the potential dangers associated with stablecoins. As it and other agencies consider taking action, they’re facing intense pressure from Capitol Hill.
“I urge FSOC to act with urgency and use its statutory authority to address cryptocurrencies’ risks,” Senator Elizabeth Warren wrote in a July 26 letter to Ms Yellen that flagged the stablecoin market’s interconnectedness and its susceptibility to investor runs. “The longer that the US waits to adapt the proper regulatory regime for these assets, the more likely they will become so intertwined in our financial system that there could be potentially serious consequences.”
Stablecoins already face another threat from the US government, as the Fed is discussing whether to launch its own digital currency. Powell told lawmakers in July that a central bank token would make stablecoins obsolete.
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More coverage from the Future Forum
AI traffic lights to ease congestion at seven points to Sheikh Zayed bin Sultan Street
The seven points are:
Shakhbout bin Sultan Street
Dhafeer Street
Hadbat Al Ghubainah Street (outbound)
Salama bint Butti Street
Al Dhafra Street
Rabdan Street
Umm Yifina Street exit (inbound)
Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
Real estate tokenisation project
Dubai launched the pilot phase of its real estate tokenisation project last month.
The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.
Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.
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