Stablecoin Issuers Ready to be Banks of the Future

It is a well-known fact that the cryptocurrency market has undergone exponential growth in 2021 and the most prominent highlight of this is the achievement of the $3 trillion total capitalization of the market. Even if this was a brief milestone, there is no denying that it is a major accomplishment because no other industry has managed to achieve it so quickly. With that said, one class of crypto known as stablecoins, which refer to tokens that are pegged to a fiat currency, has also seen a dramatic increase in their usage in recent months. 

This is partly because stablecoins have the ability to assist investors in getting their feet wet when it comes to investing in digital currencies, while they are able to eliminate most of the core problems that exist, such as the daily price volatility that seems to be plaguing the crypto market of late quite a lot. There has been a staggering 500% expansion in the stablecoin sector since 2020, as it rose from a total market capitalization of approximately $20 billion to a whopping $125 billion. As expected, this monumental expansion is not something that hasn’t caught the eye of global regulators. In fact, it has grabbed their attention so much that now the Biden administration is looking into devising a regulatory setup for stablecoin issuers, quite similar to banks.

It is true that most supporters of digital currency have an anti-regulatory outlook. However, Jeremy Allaire, the CEO of Circle, the company that has issued the stablecoin known as USD coin (USDC), has recently taken a supportive stance over this issue. He stated that proposals for regulating issuers of dollar stablecoins at the federal level in the United States was an indication of progress in the growth of the industry. Allaire said that this was an acknowledgment that these payment stablecoins could end up growing at an internet rate very quickly. 

A spokesperson for Circle said that the company had always had a positive stance when it comes to the US Congress setting up federal supervision for stablecoin issuers. The spokesperson added that the company would be ready to welcome any regulation that would help in making businesses and consumers safer and also support development and innovation that can improve national security and economic competitiveness. They said that this could help in creating a financial system that’s safer, more efficient and resilient. 

The founder and chief executive of Ardana, Ryan Matovu, stated that while there were increasing calls of ensuring regulation, it is essential to acknowledge that there are different stablecoin models that exist, along with their spectrum of decentralization. He said that regulating centralized stablecoins is practical because they are part of the traditional finance space since fiat US dollars has to be held in accounts. However, he said that decentralized stablecoins are different and they exist as on-chain assets, which means they need to be treated the same way. Experts believe that there isn’t any future stablecoin environment that can exist without regulation of some kind.