The USD Coin (USDC) issuer, Circle, has backed a proposal for a new regulation that would require stablecoin issuers to operate under the same regulations as banks.
Industry growth
Circle CEO Jeremy Allaire stressed in a commentary that the aim of the proposal is to regulate dollar stablecoin issuers in the United States (U.S.) financial system as federal-level banks by the Federal Reserve. This, in turn, could provide significant progress in terms of sector growth.
According to Allaire, the regulation would also upgrade current money-transmission regulations to a “much more fundamental infrastructure that lies at the heart of what the future of banking and capital markets could look like.” Allaire added the following:
“There’s a real recognition that if these stablecoins for payments grow, they can grow relatively quickly at the internet scale. As the stablecoin market grows to hundreds of billions in circulation and trillions in transactions, the risks to financial markets and financial stability become much greater. This has to be taken into account.”
Governments worldwide are working on stablecoins
The administration of US President Joe Biden has previously announced that it wants to provide clarity for the crypto sector. For this reason, it is in the process of creating a “special purpose manual” for stablecoin issuers. As a result, in practice they are placed in the same category as banks and these issuers therefore also fall under the same regulation as banks.
According to Allaire, the details of a banking charter for a crypto company will need to be worked out over time with various banks overseeing agencies. He is therefore certainly not opposed to more regulation in the crypto/stablecoin sector.
Stablecoins have increasingly become the talking point of regulators worldwide. Governments everywhere are investigating the possible risks of stablecoins to users, markets or the current financial system. As a result, it is still unknown in many places whether stablecoins will be given a place next to the traditional fiat currencies.