Stablecoins Surpass Mastercard and PayPal in Transaction Volume
In 2022, stablecoins have become a dominant force in the crypto market, surpassing transaction volumes of both Mastercard and PayPal. Last year, stablecoins reached an impressive transaction volume of nearly $6.87 trillion. However, while stablecoins play a critical role in the crypto economy, the United States is falling behind in terms of policy and regulation.
A Shift Away from U.S. Influence
About 60% of all stablecoin activity is now controlled by non-U.S. entities, according to Jason Somensatto, the Head of North America Policy at Chainalysis. This suggests a decline in American influence over this growing sector. Despite stablecoins accounting for approximately 40% of all transactions on blockchain networks, the United States has not created a more competitive regulatory environment.
The Consequences of Regulatory Inaction
Regulatory inaction could have significant consequences for the United States. It risks losing its ability to enforce critical measures around anti-money laundering and countering the financing of terrorism. Additionally, neglecting the stablecoin sector could hinder business growth and miss opportunities to reduce costs for consumers and lower borrowing costs for the government. The United States could also lose the advantages it currently enjoys from the dollar’s central role in international trade and finance.
Promising Legislation: Clarity for Payment Stablecoins Act
The Clarity for Payment Stablecoins Act proposes legislation that would set standards for reserve assets, empower the Federal Reserve to conduct oversight, and mandate regular disclosures to consumers. This legislative effort could provide a promising approach to stablecoin regulation.
Stablecoins: Unique Risks and Rewards
Stablecoins present unique risks and advantages compared to traditional payment methods. While they are neither riskier nor safer than traditional forms of payment, their public blockchain network operation simplifies regulatory oversight. However, this technology also introduces new operational risks that require tailored regulatory models.
Hot Take: The United States Must Catch Up in Stablecoin Regulation
As stablecoins continue to grow in transaction volume and global influence, the United States must address its lagging policy and regulatory environment. Failing to do so could have significant economic and security implications. It is crucial for the United States to adapt its crypto regulation strategy to fully leverage the potential of stablecoins in both domestic and global financial systems.
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