On Sept. 8, Michael Barr, the vice chair for supervision and Federal Reserve governor, said he was “deeply concerned about stablecoins without strong federal oversight.” This is a reaction to the growing recognition among major financial institutions, including PayPal and Visa, of the potential of stablecoins.
This op-ed is part of CoinDesk’s State of Crypto Week sponsored by Chainalysis. Jón Egilsson, former chairman of the Icelandic Central Bank, is the co-founder of Monerium, the first company to issue fiat onchain.
The Federal Reserve intends to “intensify oversight of crypto activities,” Barr said, a strong statement but not officially forward guidance. In fact, today, there is a glaring absence of much-needed regulatory clarity for stablecoins in the U.S., considering the stakes of the industry and how quickly it moves.
This is in stark contrast to the environment in Europe, where lawmakers carved out stablecoins as a serious focus when developing the most comprehensive package of crypto laws yet, MiCA.
See also: Stablecoins: A Potential Counter to De-Dollarization | Opinion
The current lack of regulatory clarity for USD stablecoins in the U.S. could precipitate a migration of the USD stablecoin industry away from American shores and towards Europe, where legal and regulatory frameworks are firmly in place.
If this scenario unfolds, it would mark a recurring pattern of arcane regulations inadvertently pushing a trillion-dollar industry beyond the U.S. borders. In contrast to Europe’s proactive approach, characterized by the implementation of time-tested, technology-neutral frameworks for stablecoin regulation, the United States finds itself trailing in the race to establish the necessary guidelines for widespread stablecoin acceptance.
This lag represents a missed opportunity for Congress and regulatory bodies to take the lead in crafting well-defined rules that not only foster innovation but also can increase financial stability.
Stablecoins offer the promise of secure and efficient transactions and storage of digital assets, all without the need for intermediation by traditional financial institutions, such as banks. And so the importance of regulatory guidance cannot be overstated. Regulation serves as a critical bulwark for consumer protection, and upholds the…
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