Classification by market value
The total market value of stablecoins currently stands at over $ 130 billion with Tether (USDT) leading the way with a market value of $ 70 billion, followed by USD Coin (USDC) at $ 33 billion, according to data from CoinGecko.
Stablecoins have been used to facilitate crypto trading and also serve as a fiat pathway for crypto users seeking access to decentralized finance (DeFi). However, central banks and regulators have criticized these alternatives to digital currency because they pose a risk to the stability of the financial system.
The IMF has warned that “the challenges posed by the crypto ecosystem include risks to the operational and financial integrity of crypto-asset providers, investor protection risks for crypto-assets and DeFi, and inadequate caveats and disclosure for some. stablecoins ”.
“As the role of stablecoins increases, regulations should match the risks they pose and the economic functions they perform,” the IMF wrote. “Emerging markets facing crypto risks should strengthen macroeconomic policies and consider the benefits of central bank issuance of digital currencies.”
The FSB also said this month that countries’ implementation of its recommendations on ‘global stablecoins’ regulations was’ still at an early stage’ and international coordination was essential to overcome regulatory arbitrage.
Cynthia Wu, Founding Partner and Head of Sales and Business Development at Matrixport
Given the size of the stable market capitalization of over US $ 130 billion and the critical role it plays as the underlying infrastructure and source of liquidity for the entire crypto market, this is a very positive sign for me that regulators are now considering including it in banking regulation.
Being regulated as such, it will help eliminate fraud and instill the highest degree of confidence in a financial market, ultimately paving the way for faster and wider institutional and commercial adoption. Additionally, it will be the only way for Stablecoin to get deposit insurance from the FDIC, which again is a powerful driver for adoption and broader use cases.
Julian Hosp, co-founder and CEO of Cake DeFi
Concerns about the governance of stablecoins should come as no surprise. What would it mean for a business to sell its own currency on a geographically blind digital service network?
With this in mind, IOSCO and the Bank for International Settlements are considering developing plans to establish stablecoin surveillance. Like Diem, fiat-backed stablecoins have a value guaranteed by an underlying fiat currency, such as the US dollar. Another popular alternative is commodity backed stablecoins. Both serve to mitigate the volatility seen in popular cryptocurrencies, making them impractical for trading activities.
The presence of regulation in the stablecoin ecosystem is only one sign of the maturity of the industry. Moving away from allowing businesses to operate in a legal gray area, a framework that can encourage consumer protection while recognizing innovation and the important benefits that stablecoins can bring in the long run is ultimately a positive development for space. In fact, regulators are paying attention to “systemically important” stablecoins.
Ultimately, the introduction of a regulatory framework is just a sign that regulators are starting to notice that the digital trading landscape is changing and that stablecoins have the potential to radically reshape the future of global finance and to pave the way for greater financial inclusion.
Michael Conn, CEO and President of Zilliqa Capital
Stablecoins are increasingly gaining the attention and scrutiny of global regulators given the size of the market and the possibility of a significant impact on the market should there be a significant collapse of Tether, or any of it. another basic stablecoin on the market.
This has led global regulators to view stablecoins and the companies behind them as real financial instruments, and even banks in some cases. This should lead to stablecoins ideally having little or no credit or liquidity risk in the event of default.
Eventually, a clearer framework around stablecoins could ultimately lead to greater adoption globally, and in particular by institutional clients.
Robert Whitaker, COO of Huobi Nevada
The SEC by sending subpoenas to Circle clearly indicates its intention to conduct a securities investigation into Circle. The SEC can be expected to continue investigating the stablecoins and DeFi markets in the near future. When the regulation of DeFi platforms is put in place, it will certainly lead to centralization. The only way to prevent this from happening is to have supervision built into stablecoins.
I don’t see how full decentralization as we know it in the DeFi space can coexist within the monetary policy of a FATF participating country. The advantage of regulation is a safe and secure environment for investors. This will lead to more widespread adoption of the DeFi space.