Tue. Aug 9th, 2022
Source: Adobe/Casimiro

The USD 80bn-heavy stablecoin industry requires more regulatory clarity and harmonization across jurisdictions, but the coins’ increased use for transactions is the ultimate factor that will boost adoption across the world, according to the participants of a discussion held at the Crypto and Digital Assets Summit hosted by The Financial Times.

Dante Disparte, Chief Strategy Officer and Head of Global Policy at Circle, the issuer of the major stablecoin USD coin (USDC), said that stablecoins have the potential to “solve the original sin of cryptocurrencies in the first place which is hypervolatility.”

A major stablecoin “could challenge the very sovereignty of the dollar,” he argued. “The reason why regulators […] care about it is that, perhaps, more than any other cryptocurrency, stablecoins have the highest chance of entering retail and widespread adoption.”

“Many stablecoin issuers ignore the existence of electronic money circulation regulations,” according to Disparte who said that one of the common misconceptions was that cryptoassets and stablecoins operate within a “Wild West” that lacks any applicable regulation.

Scott Bauguess, Vice President for Global Regulatory Policy at major crypto exchange , which also co-manages USDC, said that while stablecoins are “in their infancy right now,” they could contribute to breaking down the traditional financial landscape, and offer “endless” use cases.

“I think the United States is winning the digital currency race,” as it remained a hub for major industry players, according to Bauguess.

He said that he hoped “that more legislation will be proposed in more jurisdictions,” but a further five-six years are to be expected before more regulatory clarity could be brought to stablecoins.

However, commenting on Europe’s stance on stablecoins, Bauguess also argued that the European Union’s designed crypto-focused Markets in Crypto-assets Regulation (MiCA) could be to crypto what the General Data Protection Regulation (GDPR) was to privacy, but also in a positive way.

Per Bauguess, more regulatory harmonization is required at the international level as its lack created a risk that jurisdictions across the globe would engage in “a race to the bottom” that could hurt crypto and stablecoins.

Richard Crook, Chief Operating Officer at crypto-focused financial services company BCB Group, opined that a centralized rating authority is not needed for stablecoins, “especially those that are backed against the dollar,” adding that tether (USDT) is the largest market participant and that “it has picked up a 70% market share, just because it was the first. It doesn’t mean it will be the last.”

“Good money always edges out bad money, so it’s only a matter of time before stablecoins stabilize,” Crook said.

Timothy Rice, Chief Executive Officer at Coin Metrics, observed that Ukraine and the robust flow of crypto donations to the country amid its struggle against Russia’s invasion provided a good example of how a country and its population could leverage the benefits offered by stablecoins to aid their economy during wartime.

Stablecoins are heading towards more use for transactions which will be a key factor in boosting their adoption across the world, he said.

“Hopefully, going forward, we will see more transactional activity with stablecoins,” according to Rice.

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