Shut the stable doors, the horse has bolted!
Here is our pick of the 3 most important Stablecoin news stories during the week.
This week saw a concerted move by politicians and regulators to agitate for the power to tame the wild Crypto horse. But can they? The tech is out there and almost anyone, anywhere can create a stablecoin, crypto coin or NFT!
Firstly, according to a Bloomberg report, the Securities and Exchange Commission (SEC) is about to be given “significant” authority to regulate stablecoins. The market is bullish for the regulatory clarity that may follow from the move as Stablecoins have surged in popularity this year, thus warranting attention.
Then the BIS or Central Bankers Banker weighed in. A number of emerging markets and developing economies (EMDEs) have been looking at stablecoins and central bank digital currencies (CBDC) to address weaknesses in their financial systems.
But according to a paper released Friday by the Bank for International Settlements (BIS), these digital currencies may create daunting issues in these markets and not address problems that other fintech innovations are tackling.
Finally, a group of U.S. regulators urged lawmakers to subject stablecoin issuers to the same strict federal oversight as banks, in a highly anticipated report released Monday.
Congress should also require custodial wallet providers to be regulated by a federal agency and limit stablecoin issuers’ interactions with non-financial companies such as tech or telecom providers, the President’s Working Group for Financial Markets said. The latter recommendation appeared to be aimed squarely at Diem, formerly Libra, the controversial stablecoin project created by Meta, the social media giant previously known as Facebook.
The report is part of an escalating effort by policymakers to rein in this $138 billion segment of the broader crypto market to mitigate the risks they believe stablecoins pose to consumers, markets and the financial system. Stablecoins, or cryptocurrencies pegged to the value of another asset such as the U.S. dollar, have seen explosive growth over the last two years despite lingering questions about their backing.
So there we are, the regulators and at least some politicians want to rein in stablecoins and the ecosystem around them. I really think (and hope) that the horse has well and truly bolted and to mix my metaphors if they do try and play whack-a-mole with all the players in all the jurisdictions it is going to be one crazy ride.
Alan Scott is an expert in the FX market and has been working in the domain of stablecoins for many years.
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