Regulation
Is the US behind in regulating stablecoins? Former CFTC officials speak
- Stablecoin adoption grows, but complex US regulations hinder progress.
- Tether’s influence raises concerns about regulatory and tax disparity in the United States.
The US economy has witnessed a sea change in sentiment towards cryptocurrency. Starting with the approval of the commercial Bitcoin [BTC] ETF, followed by preliminary approval of the Ethereum [ETH] ETFs and Now Presidential Elections Influenced by Cryptocurrencies.
All these events highlight the US’s softened approach towards the sector. Amid these dynamic changes, a question arises: How will these changes affect stablecoins?
In the recent ‘Unchained’ podcastsFormer CFTC Chief Innovation Officer Daniel Gorfine pointed out that US-backed stablecoins offer a key opportunity for the US to strengthen its financial dominance.
However, he noted that the United States has been slow to develop federal regulations for stablecoins. He said:
“There are many global jurisdictions that are moving forward with stablecoin rules and standards, including dollar-backed stablecoins, and that will happen before the US does anything at the federal level.”
Furthermore, challenging the risks that cryptocurrencies pose to the financial system, Gorfine highlighted that it was Bitcoin that initiated discussions on new financial infrastructures, including stablecoins and CBDCs.
The need for stablecoins
In fact, since cryptocurrencies like Bitcoin are highly volatile, it is stablecoins that come to the rescue. Their value remains stable as they are pegged to fiat currencies such as the US dollar, making them reliable digital assets.
It goes without saying that the growing adoption of these coins is evident as large industry players such as Stripe and PayPal have begun to accept stablecoins, such as USDC, for major payment functions.
Adding to the fray, former CFTC Chairman Chris Giancarlo noted in the same conversation:
“I think stablecoins are potentially a great way to meet an unmet global demand for dollar exposure.”
These discussions highlight the ability of stablecoins to shake up traditional payments and protect the global position of the US dollar.
However, if we look at the flip side, the complex US regulatory landscape presents obstacles to the expansion of stablecoins.
The US regulatory framework in question
Therefore, by proposing the use of the dual banking system model, which provides for both state and federal regulatory oversight, Gorfine added,
“It shouldn’t be as complicated as we’re making it… I think we could create consistent oversight of stablecoin issuers pretty quickly.”
While countries like Singapore efficiently license issuers of US dollar-based stablecoins, the United States still struggles to establish a coherent regulatory framework for its currency.