Treasury Fears Stablecoins Are “Skyrocketing”, Moves To Rein In Burgeoning Technology
A Politico piece — light on quotes — details the U.S. Treasury’s concern over stablecoins becoming a preferred form of payment online.
Covered:
- US Treasury Concerns
- Yellen And Powell On Stablecoins
- Why So Much Paraphrasing?
US Treasury Concerns Over Stablecoins
Stablecoin use has exploded. Transactions directly using them grew from ~$250B in 2019 to $1T in 2020, per Messari. That growth has accelerated; transaction volume in 1st 3 mos of this yr roughly matched all of last yr & in the 2nd quarter jumped to $1.7Thttps://t.co/FKxe2J7e3V
— Victoria Guida (@vtg2) September 21, 2021
According to Politico, the US Treasury is looking into ways to rein in stablecoins, fearing their popularity may lead to greater financial risk for consumers and the financial system.
The reason for the increased scrutiny is because the burgeoning technology, “could transform the way Americans pay for things,” according to Politico writer Victoria Guida. “Treasury and other regulators want to ensure that they’re reliable, even during financial panics.”
Recommended: For more specifics on how USDC is equipping itself to deal with market volatility, check out our piece on USDC’s plan for 100% cash backing.
Not to mention, the Treasury is concerned about Facebook’s Diem project. Facebook’s 3 billion users could quickly lead to mass adoption for stablecoins, which for now are still largely used on exchanges.
Guida also mentions a growing tension between not only crypto “upstarts” and treasury, but also between crypto and traditional banks. It’s a rare admission that the banking industry isn’t too fond of the competition.
Yellen And Powell On Stablecoins
Recommended: USDC Killing Tether FUD.
Treasury secretary Janet Yellen has been outwardly against crypto and stablecoins. She’s also believed to be behind the last minute additions to the crypto bill.
Moreover, Guida mentions Fed Chair Jerome Powell’s belief that stablecoins aren’t necessary with a central bank digital currency (CBDC).
However, Guida pouts out, “Some issuers like Circle and Paxos are contemplating that future as well, believing that the payment networks they build for their stablecoins could be used as roads that a Fed digital dollar could drive on.
Why So Much Paraphrasing?
This is definitely not the first time stablecoins have come under regulator scrutiny. We’ve seen various iterations of “the [insert regulator] looks to [synonym for control] stablecoins,” pieces. Nothing much comes of it, except for maybe a self-congratulatory quote tweet from Bitfinex’ed.
But, there is something different about this piece: the congenial tone.
Stablecoins technology are said to have “benefits,” their speed considered to be a big part of the appeal. Not to mention, the companies behind stablecoin projects aren’t described in a hysterical tone.
“Circle, which issues the second-largest stablecoin, USD Coin, is applying to be a national bank, and it says it might not even need deposit insurance because its digital currency is in the process of becoming fully backed by cash and U.S. government debt, unlike traditional bank deposits,” Guida said.
That’s some pretty positive stuff coming from the “treasury.” Which is probably why it’s so heavily paraphrased.
Though, calling it paraphrasing is generous. Guida frequently speaks for the treasury in the piece, saying things like, “Treasury and other regulators want to ensure that [stablecoins are] reliable, even during financial panics,” without even providing a, “someone at the treasury said.”
Likely, anyone Guida spoke to only agreed to on deep background. Which is curious, because, like I mentioned earlier Treasury Secretary Janet Yellen is hardly a crypto bull.
Is the treasury softening its stance on stablecoins? Might be wishful thinking. But it’s better than being left wondering if a ban is imminent.
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Text source: CryptosRus
