The cryptocurrency market has grown by an exponential rate over the past year with the pandemic forcing people to move towards quick, contactless payment methods. Even though the industry was growing in size pre-corona, the last 12 months have really opened up the eyes of the regulators to what cryptocurrencies can actually do.
One of the recent concerns raised by regulators was related to the burgeoning size of the stablecoin market, specifically cryptocurrencies such as Tether [USDT]. They claimed that the size of the market allowed several billions of dollars to be transacted without ever coming under the purview of the country’s financial watchdogs.
During a recent Senate Banking subcommittee, members discussed the various ways cryptocurrencies could hamper financial overwatch. Officials added that a majority of stablecoin holders were unaware of the fact that their funds do not come under the jurisdiction of the Federal Deposit Insurance Corporation. The FDIC is responsible for protecting the claims made during financial transactions in the United States. Josh Lipsky, the director of the Atlantic Council’s GeoEconomics Center stated:
The most immediate way that some stablecoins might come under attack is from enforcers, such as what happened with the New York attorney general, who could pursue issuers for lying to consumers. Stablecoin issuers could eventually work in tandem with international governments’ projects to issue their own digital currencies but that the U.S. and others will have to develop regulations to ensure consumers aren’t hurt.
The Senate Banking members are not the first to speak against stablecoins as the industry has also been attacked by government officials such as Senator Elizabeth Warren and Federal Governor Lael Brainard. These comments came in the wake of Tether’s growing dominance on the cryptocurrency charts, currently sitting pretty at number 3. The world’s largest stablecoins holds a market of roughly $63 billion with a daily trading volume of $58 billion. Tether’s growth also allowed it to surpass major cryptos like XRP and Bitcoin Cash on the charts.
Banking officials stacked on their arguments by reminding everyone of Tether’s trading ban a few years back. Tether General Counsel Stuart Hoegner assured everyone that Tether and all its resources were maintained at the highest levels of safety and security. Hoegner promised:
We continue to look for avenues of regulation globally and are pursuing regimes in several countries
While regulators are trying to bring stablecoins under their thumb, the US government has revealed tentative plans to create a state backed digital asset. A CBDC will be controlled by the state while using blockchain technology and all the core fundamentals of a stablecoin. Although the US is not the first country to initiate or even begin working on such plans, its statements may play a huge role in how the groundwork is laid out.