Stablecoins compels Governments to embrace
Stablecoins have been talk of the town off lately. Unlike crypto, they are a type of digital asset pegged to traditional currencies such as US dollar. The stablecoin market currently stands at a $162 billion. It’s a vital source of liquidity in cryptocurrency markets around the globe. They are used by traders and investors to buy and sell other assets or as a safe place to park wealth when the market goes down. And that is primarily because they are pegged to US dollar and remain unaffected.
Stablecoins have currently caught the attention of regulators as they offer a compelling digital payments option that needs more oversight from governments. They can potentially transform the way we pay for everything from cell phones and gasoline to haircuts and coffee. As stablecoins can be transferred instantaneously to anyone around the globe with little to no transaction cost.
According to a long-awaited report released by the Biden administration;
Stablecoins support faster, more efficient, and more inclusive payments options.
President’s Working Group on Financial Markets
Biden’s working group advised Congress to pass legislation which limits stablecoin issuance to insured banks, a move that would give regulators far greater jurisdiction over the industry. Stablecoin’s relatively calm and potential uses have draw attention from Capitol Hill and financial regulators alike. The Fed, for example, has for months been studying the possibility of a US stablecoin, or central bank digital coin (CBDC).
Given the dollars role in global economics and politics, it is essential that the Fed remain aware of the stablecoins trends and it’s growing acceptance. Of course, stablecoins are far from enemies of the dollar. If anything, they can only cement dollars importance given the right approach in regulation. Since all major stablecoins are denominated in USD, their exponential adoption around the world gives the U.S. a critical opportunity to expand the USD dominance.
“Congress must work to fully understand and embrace these innovative new technologies, like #crypto. We don’t need knee-jerk reactions by lawmakers to regulate out of fear of the unknown.”
Representative Patrick McHenry of North Carolina
In the meanwhile, Cryptocurrency derivatives exchange FTX calls on banks to reach out and discuss the possibility of accepting stablecoins in exchange for a $1 million reward.
China, South Africa, South Korea, Sweden and others are taking a more active approach to stablecoin development and promotion than the U.S. by piloting stablecoins backed by their respective central banks, known as central bank digital currencies (CBDCs). Although the push for stablecoin adoption seems to be very real. But it is yet far from acceptance. We will probably see more of central bank digital currency (CBDC) version rather than decentralized stablecoins. But one thing that is evident, those who refuse to embrace, will be left behind.
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