In recent times, multiple stable coins have emerged from the house of private entities. With an aim to enhance liquidity and simplify settlement across the growing ecosystem. And turn over as a potential alternative to fiat. It is known that cryptocurrencies are prone to volatility, market sentiments, and utility initiatives.
Stable coins counter these shortcomings, as these peg their value to a unit of the underlying asset. Often based on faster blockchains and backing the regional legal tender. Central banks are buckling up, to traverse their own stable coins. On the other hand, the governing bodies are looking forward to the enforcement of regulations on stable coins.
The Crackdown of Stable Coins
Substantial reports suggest that the U.S SEC, along with other U.S agencies have come to a consensus. According to this, the authority is putting forward the legislation of the stable coin industry. In addition, the SEC’s newly found “Significant Authority” over the sector, is set for announcements. In the Treasury Department’s forthcoming stable coin report later this week.
Consecutively, the report is set to meltdown the regulatory jurisdiction of CFTC (Commodity Futures Trading Commission). And Treasury Department with regard to stable coins. The report from the Treasury Department was earlier announced in July. During the meeting of the President’s Working Group of Financial Markets (PWG).
The sources also assert that Gary Gensler has been in favor of the regulation of stable coins. Including empowering the commission to enforce action against issuing body. This could be justified, as Gary Gensler had earlier referred stable coins to poker chips.
How Will This Impact The Crypto Space?
According to some sources, nearly $3 trillion in stable coins such as Tether and USDC were transacted in the first half of 2021. Moreover, the stable coin market has grown leaps and bounds since its inception. Tether is the largest stable coin in the world, and the fourth largest crypto asset. The 24-hour trading volume is currently the largest in the crypto space at over $62 billion. Meanwhile, the market cap is over $70 billion.
Tether holding the lion’s share in the stable coin space will face the wrath of the crackdown. To a greater extent. Moreover, USDT has been accused of money laundering in the past. Unlike USD, Tether doesn’t deposit any assets to mint new coins. USDT has been the most popular pair in the crypto market. Several exchanges need users to convert their USD to USDT, to start with their transactions. Moreover, A lot of people use USDT to store their profit extractions.
Collectively, these act as a catalyst in the governing body’s regulatory decisions over stable coins. In addition, other stable coins such as USD coin, Binance USD, among others will face heat. If materialized, we can expect the crypto space to tumble, as USDT is a major pair with BTC. The consequences are no rocket science. However, we can expect things to normalize after the storm, as these are relatively less volatile.