Stablecoin News for the week ending Wednesday 5th January.
Here is our pick of the 3 most important Stablecoin news stories during the week.
As this is the first edition for 2022, I thought I would focus on articles that discuss what I expect to be the big themes of this year.
The first out of the gate will be the battle to regulate. How much to protect consumers/or the status quo and how little to not stifle innovation so that we can see where this new technology can take us? This article gives a good summary of where we are and the likely milestones in 2022.
“Regulators around the world have been thinking seriously about the risks associated with stablecoins since 2019 but recently, concerns have intensified, particularly in the United States.
In November, the United States’ President’s Working Group on Financial Markets, or PWG, issued a key report, raising questions about possible “stablecoin runs” as well as “payment system risk.”
It raises questions: Is stablecoin regulation coming to the U.S. in 2022? If so, will it be “broad stroke” federal legislation or more piecemeal Treasury Department regulation? What impact might it have on non-bank stablecoin issuers and the crypto industry in general? Could it spur a sort of convergence where stablecoin issuers become more like high-tech banks?
We are “almost certain” to see federal regulation of stablecoins in 2022, Douglas Landy, partner at White & Case, told Cointelegraph. Rohan Grey, an assistant professor at Willamette University College of Law, agreed. “Yes, stablecoin regulation is coming, and it’s going to be a dual push” marked by a growing impetus for comprehensive federal legislation, but also pressure on Treasury and related federal agencies to become more active.
Others, however, say not so fast. “I think the prospect of legislation is unlikely before 2023 at least,” Salman Banaei, head of policy at cryptocurrency intelligence firm Chainalysis, told Cointelegraph. As a result “the regulatory cloud looming over the stablecoin markets will remain with us for a while.” That said, the hearings and draft bills that Banaei expects to see in 2022 should “lay the groundwork for what could be a productive 2023.”
Will US regulators shake stablecoins into high-tech banks? (cointelegraph.com)
The next theme that I think 2022 will give more meat to the bone is Web 3.0. Others may have different definitions as to exactly what it is or is not, but mine is a Web app with an attached wallet, blockchain and of course stablecoin!
The best example I can think of are NFT’s. Creators can define how their work interacts with the market with the payment of royalties triggered automatically. In this way an artist can sell quick and cheap without loosing if and when the market discovers a higher price. But many other applicatons are expected to be discovered including some re-engineering of currently well established web apps such as Facebook and Google.
This blog gives a broader definition as well as explores the type of applications and user benefits we are likely to see.
https://coinmarketcap.com/alexandria/article/what-is-web-3-0
Finally, whilst the future promise of Web 3.0 is amazing, what is happening today in DeFi is truly incredible. There is some 100b invested (locked) in this new world of Decentralised Finance, where you can on a peer to peer basis, lend, borrow, earn interest, buy insurance, trade derivatives, trade assets, and more — but it’s faster and doesn’t require paperwork or a third party.
The top five players are listed below.
This explainer gives some more detail.
https://www.coinbase.com/learn/crypto-basics/what-is-defi
In summary, 2022 is going to be a pivotal year as Regulators and the Political class start making decisions around which road to to travel down with stablecoins in particular, at the same time we will see more flesh put on the bone as Web 3.0 continues to take shape. But the largest real time change will come as DeFi (a power user of stablecoins) will continue to grow at a rapid rate, challenging our last century notions of how Finance is meant to work.
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Alan Scott is an expert in the FX market and has been working in the domain of stablecoins for many years.
We have a self imposed constraint of 3 news stories per week because we serve busy senior Fintech leaders who just want succinct and important information.
For context on stablecoins please read this introductory interview with Alan “How stablecoins will change our world” and read articles tagged stablecoin in our archives.
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