A recent report disclosed that the United States has intensified efforts to regulate the stablecoin industry in the country.
This is coming due to the prevalence of digital assets last year that has spurred certain unscrupulous actions, as well as the overarching global transition regarding the US dollar reverence.
According to a post by Watcher Guru, it disclosed that the US is coming after digital assets in order to save and promote the US dollar while preserving the dual banking system.
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For many US lawmakers, this move is necessary due to the emergence of bad actors using stablecoins which have spurred legal actions.
Speaking on this, the Head of the entity that manages Societe Generale’s digital assets business Jean-Marc Stenger said the move by the US lawmakers isn’t just a focus on bad actors, but also a focus on dollar dominance.
In his words,
“All the conditions are in place to allow a move toward rebalancing euro versus dollar stablecoins in the long term. However, it isn’t just Europe, it’s the overarching shift of global finance digitization. It’s about maintaining the status quo, thereby ensuring the dollar’s status will never shift”.
Stablecoin, a special class of cryptocurrency designed to maintain a stable value, is believed to share many similarities to the U.S. dollar. In recent years, the market capitalization of stablecoins has been growing much faster than the stock of the dollar in circulation. This indicates a surging demand for stablecoins marketwide.
For example, USDT, the most popular stablecoin, has continued to grow sharply in demand. Data from CoinMarketCap revealed that the market capitalization of USDT increased nearly 35-fold from January 2019 to June 2022.
However, in a recent development, the US is reportedly rushing to get stablecoins and cryptocurrency activities regulated as quickly as possible.
Dante Disparte, the CEO of Circle in an interview with CNBC said he was in favor of the impending stablecoin regulation, however, the US government has delayed rolling out a regulatory law. Specifically, he noted that connectivity with illicit activity which the stablecoin is often used for is “bad for the US dollar” and hinders the currency.
Domestically in the United States, there are reported cases of the use of Stablecoins for funding fentanyl trafficking and all types of illicit actions that are bad for the U.S. dollar.
The regulation act which was passed by the House Financial Services Committee in 2023, which was moved to the floor of the House of Representatives for consideration, is yet to be approved by lawmakers in the House.
The intensified regulatory efforts reflect the US government’s recognition of the growing importance of stablecoins in the digital economy and the need to address potential risks associated with their proliferation.
By implementing robust regulatory frameworks, authorities aim to promote transparency, consumer protection, and overall financial stability while preserving the integrity of the US dollar.
Unless this is addressed, analysts predict that it would be against the interest of the country and the economy. They however remain optimistic that this will be a year where policymakers get around to doing something affirmatively on stablecoins.