Large capital outflows from digital assets, institutional investor exit and industry crisis. What else threatens the increased attention of regulators to stablecoins
On November 8, the US Federal Reservepublished a semi-annual report, in which it named the main threats to the financial system. The fifth place in the list of the main threats is occupied by stablecoins. Federal Reserve analysts argue that stable digital coins could have a negative impact on the financial system over the next 12-18 months.
In early November, the US presidential working group on financial markets urged the country's authorities to accelerate the development of stablecoin regulation. The group's concerns were caused by a possible undersupply of stablecoins and opaque reserves. In this regard, the authorities plan to limit the list of companies that have the right to issue their own stablecoins. The group proposes to allow only insured depository institutions to issue stablecoins.
In September, the head of the Securities and Exchange Commission (SEC) Gary Gensler spoke about stablecoins. According to him, stable digital coins work like poker chips in a casino. Gensler also called private forms of money short-lived and compared the cryptocurrency market with the Wild West.
Topplabs.org experts explained why the US government and regulators see stablecoins as a threat and how officials can regulate these assets.
Attention is focused on stablecoins
Stable digital coins and the issue of their regulation have become the hottest topic in the cryptocurrency market lately, says Maria Stankevich, Development Director of the EXMO crypto exchange. This is because assets have shown impressive growth in 2020 and 2021, influenced by the popularity of decentralized finance (DeFi), she said.
“The total value of stablecoins has now exceeded $ 30 billion, reflecting the increased investor demand for assets with a stable price in unstable times,” the expert explained.
Initially, the attention to stablecoins was attracted by the head of Meta (Facebook) Mark Zuckerberg and his Libra project (now called Diem), Stankevich noted. She explained that from the point of view of the state, the massive use of stablecoins increases the risks of leakage of control of economic processes from traditional financial structures and regulators to third parties.
Meta (Facebook) planned to release its own stablecoin in the first half of 2020, but scrapped those plans due to warnings from regulators. Last year, the company rebranded the project, changing the name of the stablecoin from Libra to Diem. The company explained that this was due to the negative that the early version received.
What is the danger
Stablecoins can be a threat to the global economies for many reasons, said lead analyst at 8848 Invest, Viktor Pershikov. In his opinion, the main negative factors in the current situation are the insecurity of the interests of the owners of stable digital coins and the risk of losing control of regulators over the money supply. The analyst also recalled the anonymity and opacity of transactions in stablecoins, which allow them to be used for illegal actions, money laundering, tax evasion, etc.
Attempts to regulate stablecoins are one of the main risks for the cryptocurrency industry next year, Pershikov said.
"If, in the process of studying these assets and their issuing companies, it turns out that the audit of the largest stablecoins is not true, and they are not adequately backed by assets, then undermining confidence in stablecoins will lead to a crisis in the crypto market," the analyst says.
It can also lead to a large outflow of capital from digital assets and the flight of institutional investors from the market who are just beginning to believe in cryptocurrency, added Pershikov.
Regulators were able to find a point of pressure on the cryptocurrency industry in the form of stable digital coins, so in the near future it is necessary to monitor what events will take place in this matter, a leading analyst at 8848 Invest warned.