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Stablecoin issuers are expected to be the way for banks to adopt in the future


It is undeniable that the cryptocurrency market continues to grow and develop during 2021, and the total capital of the industry recently illustrates this point. beat The 3 trillion dollar mark, despite the relatively short period of time.

In other words, stablecoins are cryptocurrencies whose value is linked to fiat currencies. Their usage has increased sharply in recent months. This is largely due to their ability to help investors access digital currencies while eliminating many The core issues of the company-such as daily price fluctuations-are currently affecting the crypto market.

Since 2020, the stablecoin industry has grown by a staggering 500%. rise The total market value has increased from approximately US$20 billion to more than US$125 billion. It is conceivable that global regulators have not ignored this huge increase, so much so that the Biden administration is actively seeking to design a bank-like regulatory setup for stablecoin issuers.

Although digital currency proponents are known for their anti-regulatory prospects, issuers of stablecoins (such as U.S. dollar coins) (USDC), Circle CEO Jeremy Allaire recently take Supporting position on this issue. In a recent interview, he stated that the proposal to regulate issuers of US dollar stablecoins at the federal level marked progress in the development of the industry. “People really realize that as these payment stablecoins grow, they can grow on the Internet relatively quickly,” Allaire commented.

Is regulation the way forward?

After contacting Circle, a spokesperson for the company told Cointelegraph that the company has long supported the U.S. Congress to establish federal oversight for the issuance of stablecoins, adding:

“In the era of cryptocurrency and blockchain, this is critical to the rapid expansion of the U.S. dollar’s ​​competitiveness and strategic importance. We also know that, just like the creation of the Internet, only through strict public-private partnerships can people all over the world be able to Really benefit from the public blockchain.”

The spokesperson stated that Circle will continue to welcome any regulations that help make consumers and businesses safer while supporting innovation and development that improve economic competitiveness and national security. They said: “We believe this can lead to a more efficient, safer and more resilient financial system.”

Ryan Matovu, CEO and founder of Ardana (a Cardano-based asset-backed stablecoin protocol and decentralized exchange), told Cointelegraph that as the voice of regulation continues to grow, it is necessary to recognize different stablecoins in the field Models and the scope of decentralization in which they exist. He said:

“The supervision of centralized custodial stablecoins makes sense because they operate in the traditional financial space, that is, holding fiat dollars in their accounts. Decentralized stablecoins are not in this range, as pure on-chain assets Existence should be regarded as a peer-to-peer platform, not a “issuer.”

Is supervision a foregone conclusion?

Steven Parker, CEO of cryptocurrency wallet app Crypterium and former general manager of Visa Central and Eastern Europe Network, told Cointelegraph that there is absolutely no future stablecoin environment that will not end with regulations that are at least on par with the bank’s rules. Today prevails .

He emphasized that Sir John Cunliffe, Deputy Governor of the Bank of England, Recent comments The continued growth and use of digital currencies may lead to major financial crises. Parker added:

“Policy makers reacted swiftly to Libra (now a form of stablecoin Diem), and there has been a major regression in its implementation. Anyone who believes that regulators will only allow a new type of unregulated People who play a leading role in the economy and finance are not familiar with the operation of financial supervision. There is a struggle to control supervision, but once it is resolved, stablecoins and their creators and managers will be subject to strict supervision.”

Not everyone believes in the need to strengthen supervision. Steve Gregory, CEO of the U.S. subsidiary of the trading platform Currency.com, told Cointelegraph that not all stablecoins are created equal, and unlike banks, they do not have the full trust and credit of a sovereign country like the U.S. .

Nonetheless, Gregory noted that the exponential growth rate of stablecoin adoption seems to indicate that the market has not been affected by the loosening of stablecoin regulation, adding:

“Ultimately, just like how cryptocurrency exchanges operate, there will be two types of stablecoin issuers in the future: those who deliberately take advantage of regulated jurisdictions and provide transparent accounting, clear redemption rules, and a basket of investments. The person protected by the author, and vice versa, there will be other issuers who have a strong secondary market but can still operate normally without clear rules. This may be synonymous with financial institutions.”

Gregory said that the first basket may be a place where regulated financial institutions engage in crypto-specific financial products, while the latter is more used for cross-border transactions from countries with strict currency controls, peer-to-peer markets and offshore exchanges.

Finally, in terms of how to best manage the stablecoin market, Gregory believes that free markets should go with the flow, which will allow regulated stablecoins to find their place in the global economy and grow accordingly. He believes that unregulated stablecoins will continue to grow and evolve into their own niche market: “In general, it is a global asset class, and the different regulations of each specific country/region make it difficult to incorporate the utility of stablecoins. Regulatory framework.”

The way forward

As part of its future plans, it seems Biden Administration It is seeking to develop a new “special purpose charter” for stablecoin issuers, which will effectively put them in the same category as banks. In this regard, Allaire believes that the details of the crypto company’s bank charter need to be resolved over time so that the rules make sense for players operating in this evolving space.

It is also worth noting that in the past few months, stablecoins have become a core topic for regulators.As early as September, it was reported that the U.S. Treasury Department held several meetings to study in depth The risks of stablecoins To their users and the financial system they operate in.


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