As stablecoins grow, what should regulators do?
Here is our pick of the 3 most important Stablecoin news stories during the week.
Last week we saw further evidence of the Crypto and its related Stablecoin ecosystems continued growth and a further push by regulators and politicians to get a grip.
A great number of digital currencies have swelled in value this year and as the end of 2021 approaches, the market capitalization of all 11,000+ crypto assets in existence is roughly $2.6 trillion. These days, it’s safe to say that dollar-pegged tokens, otherwise known as stablecoins, have a strong presence in the crypto market. Today the market capitalization of all the stablecoins in the world is more than $152 billion or 5.84% of the crypto economy’s USD value.
It appears as though the Biden administration is looking to devise a new “special-purpose charter” for stablecoin issuers, which will effectively put them in the same category as banks.
“The rapid scaling and strategic importance of this to dollar competitiveness in the age of crypto and blockchains is critical. We also know that, much like with the creation of the internet, it’s only through a rigorous public-private sector collaboration that people everywhere will be able to tangibly benefit from public blockchains.”
“Regulation on centralized custodial-type stablecoins makes sense, as they operate within the traditional finance space of holding fiat U.S. dollars in accounts. Decentralized stablecoins sit outside of this and existing as purely on-chain assets should be treated as such as peer to peer platforms as opposed to ‘issuers.’”
And in our final story, the Bank of Israel has spelt out why it needs to get serious about a CBDC. They worry about fragmentation (a lot of different forms of money that they don’t control) and what they would mean for their ability to implement monetary policy.
So in summary, while privately issued stablecoins continue to grow in use and acceptance to be over USD$150b in value, politicians and regulators (Central Banks) are trying to figure out what if anything they should do in response.
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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