US Government Debates Stablecoins & Regulation


The inevitably long tug of war between the old school and the new has taken a new turn this week, as the US Government has publicly aired its negative opinions relating to stablecoins, right at a time at which they are rising in popularity.

It is clear that USD stablecoins remain strong, which is a clear note that fiat currency still plays a major part, and with Bitcoin inflows into exchanges not growing, it is likely that prices may well increase in the immediate future.

Bitcoin has actually decreased in value over the past two days, and currently sits at around $29,500, as markets are being seen as falling under pressure as officials in the United States are starting to talk about putting forward recommendations with regard to stablecoins within the coming months.

Janet Yellen said during a President’s working group policy meeting yesterday that there is a need to act quickly to ensure there is an appropriate US regulatory framework in place, which has been widely reported as having had a negative effect.

Quite why is a mystery, because surely in order to build a sustainable framework for the current and future development of the entire decentralized financial services ecosystem, something which Coinmetro has had as part of its ethos from its launch in 2018.

Regulation is a good thing, and should be looked upon favourably.

Janet Yellin’s meeting notes, which appear to advocate the use of stablecoins as important assets in the future of the digital financial markets economy, are quite a contrast to last week’s testimony by Federal Reserve chairman Jerome Powell, who last week said that he is not a fan of stablecoins in any form whatsoever.

He believes that the main incentive for the US to launch its own central bank digital currency (CDBC) would be to eliminate the use case for crypto coins in America. “You wouldn’t need stablecoins; you wouldn’t need cryptocurrencies, if you had a digital U.S. currency. I think that’s one of the stronger arguments in its favor” he said.

Clearly, stablecoins are here to stay, and the demand for them is on the rise. Current data shows that the rise in stablecoin popularity is so steep that there is now almost $110 billion in total stablecoin supply, and it remains on a swift incline.

Some central bankers are very much in favor of stablecoins and think that there is nothing to fear. For example, Fed Governor Randal Quarles thinks there’s no need to fear stablecoins. He also doesn’t really get the case for the U.S. launching its own central bank-backed digital dollar.

Each to their own, however the figures speak for themselves. Tether is massive, with a market cap of $61 billion.

It is not quite so simple as saying that stablecoins are rising and now under the microscope of the US government to the point at which they are becoming an accepted instrument and one that policymakers are beginning to look at in terms of how to regulate it, and Bitcoin is on its way down.

There is often a pattern and we think the $20,000 area is something which is almost an unofficial reference point.

Look at the $200 billion that was wiped off Ethereum, Cardano, XRP and Dogecoin just now.

Nobody flinched, and this is a mere blip compared to the Elon Musk-driven $700 billion crash in May, plus it has now stabilized. During the May crash, as soon as that stabilized, huge numbers of people bought in.

It is not just crypto, either. There was a massive stock market sell-off yesterday, with the Dow Jones Industrial Average having experienced its biggest one-day point drop since October because of fears of the ‘Delta’ variant, and although these are different reasons, they are still large downturns in the crypto and traditional markets that coincide.

One of the fallers was Binance’s BNB cryptocurrency, however Binance has been the subject of bank sanctions and regulatory warnings recently, which once again points to the importance of operating as a fully licensed venue for all aspects of decentralized finance from exchange licensing to e-money licensing.

It’s the future, whichever way you look at it, as is the buoyancy of both stablecoins and fully independent cryptocurrency. Just make sure the right framework is in use when storing or trading it.