A money-market fund would never be allowed to follow such policies. The Securities and Exchange Commission permits money-market funds to use a $1 NAV under stable pricing conventions — valuing assets at amortized cost rather than at market price, and using “penny rounding” pricing — only on the condition that they limit their risk. Their investments must have minimal credit risk and short maturities, such as with short-term government securities and high-quality commercial paper, and they must limit the amount invested in any one issuer. The fund’s board must also believe that a $1 NAV reflects the market value of its assets.
But stablecoins like Tether face no such constraints. There is no U.S. legal framework for regulating them. There are no requirements on how reserves must be invested, nor any requirements for audits or reporting.
‘Enforcement 40’ for 2020
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