Regulators in the United States believe stable coins will be the first digital assets to come under scrutiny.
Stable Coins Are the Object of Regulators’ Suspicions
Stable coins are digital currencies that are not as volatile as standard forms of crypto like bitcoin or Ethereum. They are tied to fiat currencies like USD, the yen, and the euro, and thus experience far fewer price swings. This has made them “staples” of any crypto portfolio looking to ease selling pressure and potentially leave off any heavy price dips that could be experienced in the future, though they are considered scary by U.S. regulators given that they can be moved quite easily.
Thus, they are viewed as potentially money laundering tools. Not long ago, Treasury Secretary Janet Yellen explained that stable coins are not as predictable as one might think. They are often touted as being strong and sturdy when compared with the likes of BTC and ETH, and that the assets backing them are “safe and liquid.” However, she questions how real these statements are, claiming in an interview:
Right now, no one can assure you that will happen. In times of stress, this uncertainty could lead to a run.
Not long ago, Joe Biden issued a crypto executive order calling for agencies across the United States to examine crypto assets and their alleged risks. It is believed that the crypto order is slated to make stable currencies the first target, and many analysts seem to agree. Mark Cuban, not too long, tweeted:
Stable coins will be the first to get regulated. They need standards.
Marco Santori – chief legal officer at Kraken – mentioned in a statement:
The benefits of stable coins are myriad in my mind, and one of them is that they have more stable prices as compared to the other [cryptos]… You don’t need a financial services company to move them around.
They Are More Effective in Some Ways
Stable coins, aside from their steady pricing structures, are also looked at in a positive light in that they are cheaper to use for online transactions. In addition, several cryptocurrency exchanges, such as Coinbase, do not charge fees for customers trading their fiat in for stable assets like USD Coin (USDC) given that they both operate in similar manners and can be used for payment purposes.
However, according to reports from the President’s Working Group on Financial Markets (PWG), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC), some of these assets can be used to bypass money laundering regulations and engage in bad behavior. One of the big concerns at the time of writing is that Russia, which recently invaded Ukraine, will try to use stable currencies and other forms of crypto to bypass sanctions set in place by the U.S. and its allies.