Stablecoin issuers poised to be banks of the future on road to adoption


It is undeniable that the crypto market has grown steadily throughout 2021, as best evidenced by the total industry capitalization which recently hit the $ 3 trillion mark, albeit for a period of time. relatively brief.

That said, stablecoins, a class of cryptos whose value is tied to fiat currency, have seen their use increase dramatically in recent months thanks, in large part, to their ability to help investors familiarize themselves with digital currencies. while eliminating many of the main issues – such as daily price volatility – currently plaguing the crypto market.

Since 2020, the stablecoins industry has grown by a staggering 500%, from a total market cap of around $ 20 billion to over $ 125 billion. As one can imagine, this monumental increase has not gone unnoticed by regulators around the world, so much so that the Biden administration is actively seeking to design a bank-like regulatory setup for stablecoin issuers.

And while supporters of digital currency are known for their anti-regulatory outlook, stablecoin issuers such as USD Coin (USDC), Circle CEO Jeremy Allaire, recently took a positive stance on this. In a recent interview, he said the proposals to regulate the issuers of US dollar stablecoins at the federal level signify progress for the growth of the industry. “There is a real recognition that as these stable payment coins grow, they could expand across the Internet relatively quickly,” commented Allaire.

Is regulation the way to go?

Contacting Circle, a spokesperson for the company told Cointelegraph that the company has, for a long time now, fully supported the US Congress establishing federal oversight for the issuance of stablecoins, adding:

“The rapid scale-up and the strategic importance of this to the dollar’s competitiveness in the age of crypto and blockchains is essential. We also know that, just as with the creation of the Internet, it is only through rigorous collaboration between the public and private sectors that people around the world can actually benefit from public blockchains.

The spokesperson said 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. “We believe this can lead to a radically more efficient, safer and more resilient financial system,” they said.

Ryan Matovu, CEO and founder of Ardana – a Cardano-based asset-backed stablecoin protocol and decentralized exchange – told Cointelegraph that as calls for regulation continue to gain momentum, there must be have a recognition of the different models of stablecoin in the space and the spectrum of decentralization with which they exist. He said:

“Centralized depository type stablecoin regulations make sense, as they operate in the traditional financial space of holding US fiat dollars in accounts. Decentralized coins lie outside of that and exist as purely on-chain assets should be treated as peer to peer platforms rather than “issuers”.

Is surveillance a foregone conclusion?

Steven Parker, CEO of cryptocurrency wallet app Crypterium and former managing director of Visa’s Central and Eastern Europe network, told Cointelegraph that there is absolutely no future stablecoins environment that won’t not end with regulations that are, at least, on par with the rules that banks are subject to today.

He pointed out that Sir John Cunliffe, Deputy Governor of the Bank of England, recently said that the continued growth and use of digital currencies could lead to a major financial collapse. Parker added:

“The reaction of policymakers to Libra, now Diem, a form of stablecoin, has been swift and has seen a major regressive step in its implementation. Anyone who thinks that regulators will simply allow a new, unregulated currency to play a leading role in economic finance doesn’t know how financial regulation works. There is a battle for regulatory control, but once this is resolved, stablecoins and their creators and managers will be tightly regulated. “

Not everyone is convinced of the need for more regulation. Steve Gregory, CEO of the U.S. subsidiary of the trading platform, told Cointelegraph that not all stablecoins are created equal, and unlike banks, they are not underwritten with full faith and credit. ‘a sovereign country like the United States.

That said, the exponential growth rate of stablecoin adoption seems to indicate that the market is not phased by lax stablecoin regulations, noted Gregory, adding:

“Ultimately, just like how crypto exchanges work, in the future there will be two types of stablecoin issuers: those who voluntarily avail themselves of regulated jurisdictions and offer transparent accounting, clear rules for the redemption and investor protection in the same basket, and vice versa. , there will be other issuers which have a robust secondary market but which remain functional without clear rules which can be synonymous with financial institutions. “

Gregory said the first basket will be the likely venue for regulated financial institutions engaging in crypto-specific financial products and the latter being more for cross-border trading from countries with strict currency controls, peer markets. -to-peer and access to offshore stock exchanges. .

Finally, when it comes to how best to govern the stablecoins market, Gregory believes that the free market should run its course, 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: “Overall, this is a global asset class, and the different regulations in each particular country make it difficult to establish. conformity of the utility of stable coins within a regulatory framework. “

The way to go

As part of its future plans, it appears the Biden administration is looking to craft 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 a banking charter for a crypto company need to be worked out over time so that the rules make sense to players operating in this evolving space.

It should also be noted that in recent months, stablecoins have become a central talking point for regulators. In September, the US Treasury reportedly held a number of meetings to investigate the risks that stablecoins pose to their users as well as the financial system in which they operate.