The companies that issue stablecoins are living these days pending the report that the United States Federal Reserve (FED) plans to issue in the coming days. Especially since its president, Jerome Powell, said that private stablecoins could compete with the FED’s digital dollar.
In his statement before the Senate Banking Committee, ahead of his re-election as president of the institution he presides over, Powell made it clear that he sees no problem in CBDCs and stablecoins coexisting in a hybrid, traditional and crypto financial system.
US banks promote the adoption of their own stablecoin
Powell made these remarks in response to Pennsylvania Republican Senator Pat Toomey, a supporter of cryptocurrencies. Senator Toomey asked Powell about the possibility that the United States could issue a CBDC pegged to the dollar (the now well-known digital dollar) and the idea of turning the FED into a retail bank for the United States. Powell dismissed the idea of turning the Fed into a retail bank, but was in favor of private stablecoins competing with a digital dollar developed by the Fed. “Dollar stablecoins and future CBDCs will co-exist. We agree. But let’s support digital dollars that are here and vying to be internet currencies… today… not years from now,” Powell said.
Many attribute Powell’s positive perception of dollar-pegged stablecoins to the role that Circle, issuer of the USDC stablecoin, along with Coinbase, is playing on Capitol Hill. Without a doubt, the idea that stablecoins and CBDCs are the next secure and international payment system, with greater speed and lower costs, can promote a common international regulation in this field.
For this to happen, the position and presence of Circle is essential. This company recently surpassed the issuance of tokens on the Ethereum network, against its main rival, USDT from Tether. The USDC Supply in Ethereum currently exceeds 40,000 million dollars, compared to l0s 39 billion USDT. This is because Ethereum is still by far the largest DeFi market in the world. A market where the use of stablecoins is essential.
USDC and DeFi
Let us also remember that the issuance of USDC is driven, above all, by the DeFi ecosystem, unlike USDT, whose issuance is driven, in particular, by centralized entities, such as exchanges. This allows us to clearly analyze the immense increase in the value of DeFi and DEX protocols, compared to the bear market of cryptocurrencies, in general.
These figures underline Circle’s strategy to improve the position of its USDC token. If we add to this the work it is doing on Capitol Hill and the greater transparency of its issuance system, the strength of the stablecoin in the last two years can be better understood.
PayPal is working on the development of a dollar-pegged stablecoin
The good results of USDC have forced Tether to improve its image and that of its USDT token. In this sense, it has begun to work with the authorities and auditors to improve its transparency. In November 2021, Tether began hard work to improve its position.
Like Circle, Tether has also started to have a bigger presence on Capitol Hill. Thus, it began to work with the CFTC to clarify different events in which the company and its token have been involved. Finally, it adjusted its token freezing policies, for cases in which transactions do not respect the laws.
Tether and Ethereum lockups
In fact, Tether recently locked up three addresses on Ethereum that held more than $160 million in USDT. The reason he gave was that he was cooperating with law enforcement authorities. All of the above is a clear reflection of the enormous tensions that exist in the United States, regarding the need for a regulation that covers stablecoins and CBDCs. In this regard, Gensler has always advocated for a regulatory authority on stablecoins, which he considers securities, as well as greater oversight of the entire cryptocurrency market.
In this regard, Janet L. Yellen, Secretary of the Treasury, has said that the current supervision is incoherent and fragmented and that some stablecoins are outside the perimeter of the regulation. It should not be forgotten that the stablecoin market capitalization has exceeded 200 billion dollars. With this fact in mind, the Biden administration has recommended that Congress promote legislation that ensures that stablecoins are subject to a “coherent and comprehensive” federal framework. Something that Powell, Circle and Tether have understood.