Policymakers have been warning over stablecoins in recent months as they believe these dollar-pegged assets are not adequately regulated

The Biden administration is reportedly considering a new legal framework for issuers of stablecoin that would place them in the same group as banks, raising queries about the future of crypto regulation in the US.

Citing persons familiar with the matter, The Wall Street Journal (WSJ) reported on Friday that the Biden administration is looking to persuade Congress to create a new ‘special-purpose charter’ for stablecoin issuers as well as other firms that come in the same group. Even though it is not completely clear how the legislation will look, it is expected to be specific to these types of business models.

Policymakers have been warning over stablecoins in recent months as they believe these dollar-pegged assets are not adequately regulated. Earlier during the week, Federal Reserve Chairman Jerome Powell told the Financial Services Committee that stablecoins such as Tether and USDC Coin should be regulated within the same parameters as money market funds such as bank deposits. Though, Powell remained steadfast in stating that no blanket ban on Bitcoin or other digital assets was in the cards.

As Cointelegraph reported in July, joint research by the Fed and Yale University defined two regulatory frameworks for stablecoins in a 49-page paper named, “Taming Wildcat Stablecoins.” In that paper, the authors claimed that policymakers have only two options regarding stablecoin regulations: make them equivalent to public money or tax them out of existence through central bank digital currency.

Stablecoins — digital currencies that are totally or in part pegged to a form of fiat money such as the U.S. dollar — have expanded to become a $128b market, as per the latest market capitalization figures. Tether accounts for more than half of the total market, though competitors like USDC and Binance USD (BUSD) have made considerable progress in 2023. As these markets have expanded, worries over the liquidity and reserve status of stablecoin issuers have made eye-catching headlines.