The future of stablecoins: Should we worry?
- The future of stablecoins hangs in the balance as the specter of regulatory crackdown looms ominously.
- The Chairman of the Securities and Exchange Commission, Gary Gensler, suggested that stablecoins could be treated as securities.
- Meanwhile, Tether has revealed plans to release its audit in the coming months, while USDC is getting the green light from the auditors.
- The growth of the stablecoin in the past few years has been astronomical, reaching a combined market capitalization of $115 billion.
Stablecoins have proven to be indispensable in the current cryptocurrency climate, and their utility has seen their market capitalization exceed $100 billion, with daily trading volumes in the billions. Despite their usefulness, stablecoins face an uncertain future in the wake of increased regulatory crackdowns from the SEC, while stablecoins themselves are not supported.
Securities and Exchange Commission Chairman Gary Gensler revealed plans to tighten the screws on stablecoins, while Tether sent shock waves through the ecosystem with the revelation that it intends to release its long-awaited audit. This news comes after its competitor, USDC, compiled a successful audit that put it in the green.
Dark times ahead?
Pessimists may look at the current stablecoin climate and form a strong opinion that paints a bleak picture. This situation is a result of the frenetic pace with which central bank digital currencies are being developed around the world.
With the digital yuan entering its final stages, and others right behind it, stablecoins face an uncertain future. There is also increasing pressure from regulators and critics, who are taking swipes at stablecoins whenever the opportunity presents itself.
Recently, the Chairman of the Securities and Exchange Commission, Gary Gensler, told the American Bar Association that stablecoins whose prices depend on traditional assets can be treated as securities.
The SEC chief declared, without naming names, that it had nothing to do with whether it was “a stock token, a fixed-value token backed by securities, or any other virtual product that provides synthetic exposure to the underlying security.”
Similarly, US Treasury Secretary Janet Yellen has criticized stablecoins, stating that they pose a security risk to the financial system, and called for their regulation, while Jim Kramer described the world’s leading stablecoin, Tether, as the “Achilles heel” of cryptocurrencies. .
The future of stablecoins is in their hands
The current adoption rates and sheer volume of stablecoins can be interpreted as an indication of a bright future, despite the strict regulatory measures. However, the future of the stablecoin lies in its support, they claim.
The USDC community was delighted after Grant Thorton Accounting Company signed their Reserve Account Report. The report revealed that the company’s assets faithfully reflect the approximately US$22 billion currently in circulation.
In a similar move, Tether announced that it will reveal its audit within months, sparking community excitement.
Tether has been involved in some legal drama with the New York Attorney General’s office revealing that the stablecoin is not fully backed. If the audit of Tether, and that of other stablecoins, shows that they are fully supported, the future may not be bleak after all.
on the flip side
- Fitch, a rating agency, has stated that the growth in stablecoin issuance could have implications for “the functioning of the short-term credit markets.”
- The agency also noted that the large reserves behind digital assets may provide an incentive for regulators to increase their regulation.
Are Tether and USDC Regulated?
According to Dan Burstein, General Counsel and Head of Compliance at Paxos, Tether and USDC are not regulated. Tether claims to be “regulated,” while USDC claims to be “the most reliable and regulated dollar digital currency.”
According to Borstein, these claims are false because these stablecoins have no regulator. However, he mentioned that there are three regulated dollar-backed stablecoins in the world which are Paxos Standard (PAX), Binance Dollar (BUSD) and Gemini Dollar (GUSD).
It’s regulated because it’s supervised by the New York State Department of Financial Services, which ensures all the right boxes are checked, Burstein says.
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