The market value of encrypted assets of 3 trillion U.S. dollars has pushed up the scale of stablecoins, and the US "Stablecoin Report" has not played a market-inhibiting role

Glassnode data shows that as of November 7, the supply of the two major U.S. dollar stablecoins, USDT and USDC, hit a record high. The circulating application volume of USDT exceeded 72.186 billion US dollars, and the circulating supply of USDC exceeded 34.291 billion US dollars.

The two U.S. dollar stablecoins with the highest and second highest market capitalizations have also raised the size of the entire stablecoin market, behind which is the recent expansion of the total market capitalization of the encrypted asset market led by Bitcoin. According to the data collected by Coingecko, the current total market value of encrypted assets has exceeded 3 trillion US dollars, while the total market value of stablecoins linked to international mainstream fiat currencies such as the US dollar, euro, and British pound has exceeded 142.9 billion US dollars.

U.S. dollar stablecoins still occupy a dominant position in the stablecoin market. The week before the market expanded further, that is, on November 1, the U.S. Department of the Treasury just led relevant agencies to release the "Stablecoin Report", which summarized stablecoins and their related issues. The systemic risks brought about by the activities, and urge the US Congress to legislate as soon as possible to formulate a comprehensive stablecoin regulatory framework to ensure that payment-type stablecoin issuers can be regulated like banks.

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The market value of encrypted assets of 3 trillion US dollars pushes up the scale of stable coins

When reaching a market size of 142.9 billion U.S. dollars, the overall market value of stablecoins linked to national fiat currencies and generated from the blockchain network has expanded more than 6 times from 20 billion U.S. dollars a year ago. USDT and USDC are US dollar stablecoins. The former is issued by Tether, which has disputes over reserves, and the latter is issued by Circle, a regulated financial technology company. The two parties have been in a competitive situation in terms of market size.

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Coingecko data shows that the total market value of stablecoins exceeds 142.9 billion US dollars

Historically, huge price fluctuations in the encrypted asset market have often led to additional issuance of stablecoins. Due to the formation of price anchors with mainstream fiat currencies, stablecoins act as payment tools and purchasing power in the encrypted asset market. Its additional issuance usually means greater financing needs for encrypted asset projects and more transaction needs.

The further expansion of the total market value of encrypted assets is an important impetus for the expansion of the stablecoin market. At present, the total market value of the encrypted asset market led by Bitcoin has exceeded 3 trillion US dollars, far surpassing the US listed companies Microsoft (2.53 trillion) and Apple (2.47 trillion).

In the past 24 hours, Bitcoin (BTC) has risen by 6.4%, reaching a maximum of 66,500 US dollars, which is close to the recent record high of 67,000 US dollars; the market value of Ethereum (ETH), which ranks second in the encrypted asset market, also It rose nearly 3% in 24 hours to reach an all-time high of $4,768. Meanwhile, BNB and SOL, which rank third and fourth by market capitalization, are both up more than 20% in the past week.

Crypto brokerage IG Markets analyst Kyle Rhoda believes in an interview with the media that the decline in the real yield of traditional financial assets and the inflation expectations of the economy have increased the attractiveness of gold and crypto assets, financial institutions want to participate, regulators The actual actions did not put too much pressure on the encrypted asset market. "We have almost passed the inflection point. It (encrypted assets) is becoming part of the entire financial system, and (investors have become) very, very difficult to extricate themselves."

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The US "Stablecoin Report" did not act as a market inhibitor?

Regulators under the U.S. government, at least, have responded to the growing market for stablecoins. On November 1, under the leadership of the U.S. Department of the Treasury, the President’s Financial Markets Working Group (PWG), together with the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC), released a long-awaited “Stablecoin Report" (hereinafter referred to as the "Report").

The "Report" recommends that the United States should form comprehensive federal legislation on stablecoins, including requiring stablecoin issuers to become "insured depository institutions (IDIs)" and be included in the system of regulatory agencies like banks. This would subject issuers of stablecoins to compliance with requirements regarding capital and liquidity standards, as well as compliance with the Federal Deposit Insurance Act. Additionally, to address the critical role of digital wallets, the report recommends that Congress need to require federal regulators to oversee custodial wallet providers, oversee entities that are critical to the operation of stablecoins, and limit the interaction between stablecoin issuers and commercial entities. Affiliation to encourage competition and interoperability between different stablecoins.

The "Report" also summarizes the risks posed by stablecoins and their related activities, including investors or buyers losing confidence in the value of stablecoins, the risks that stablecoins pose to traditional payment systems, and its systemic risks to the entire financial system and centralization of economic power. In addition, PWG and other institutions also pointed out in the report that stablecoins pose illegal risks to financial integrity, including issues contrary to compliance with AML and CFT requirements. These risks have always been the focus of FinCEN, OFAC and the US Department of the Treasury.

In response to the report that the U.S. Department of the Treasury has been urging, the encryption industry is more concerned about the specific departments and law enforcement basis for stablecoin regulation. Previously, there have been rumors that the U.S. SEC will become an important regulator of stablecoins.

However, judging from the content, the "Report" did not give a clear answer, but described the current dilemma of regulatory implementation. For example, the report highlights significant gaps in the authorities’ oversight of stablecoins used for payment purposes — enforcement by the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) is limited to their respective jurisdictions. Within the jurisdiction of the SEC and CFTC, the Report recommends that stablecoin activities need to comply with federal securities laws, commodity exchange laws, and related regulations.

In the eyes of some observers in the encryption industry, this regulatory scope and law enforcement basis are a bit clichéd, and recently major companies and leaders in the encryption industry have expressed that the current law enforcement basis and the enforcement actions of the regulatory authorities are inappropriate and opaque. the opinion of.

In this regard, the "Report" also put forward additional suggestions for supervision, that is, Congress should comprehensively legislate on the asset reserves, digital wallets, operating activities and commercial competition of stablecoin issuers. While awaiting legislation from Congress, agencies such as the PWG have proposed cooperation among federal financial institutions to address stablecoin risks within their respective jurisdictions. For example, the Consumer Financial Protection Bureau can take enforcement actions under laws such as the Electronic Funds Transfer Act and the Consumer Financial Protection Act; Certain activities in currency operations are designated as potential system payment, clearing and settlement behaviors, thereby bringing these activities into the current regulatory system.

The U.S. Department of the Treasury's "Stablecoin Report" has been released for a week. The joke is that the stablecoin market has not stopped there, but has "risen all boats" with the activity of the encrypted asset market. Of course, the report does not have legally mandatory attributes, and it is difficult to assess the guiding significance of the recommended content for regulatory agencies.

Salman Banne, policy director of cryptocurrency intelligence firm Chainalysis, said in an interview with the media that the report may have instructed regulators such as the SEC or CFTC to use their existing powers to open the situation, but this is not the case. Instead, it recommends a longer, more enduring path: Congressional legislation. Bennet’s concern is that if the legislation fails, “the PWG report will fail to prompt regulators to implement the rules necessary to fully address the risks detailed in the report,” such as illiquidity, irredeemable or illicit financing, And never realize that "opportunities have been unlocked due to the widespread use of stablecoins".

According to the Morrison & Foerster law partners who are concerned about the encryption industry, although the "Report" handed over any major changes in the regulation of stablecoins to federal legislation, it clearly shows that various regulatory agencies cooperate with the SEC and CFTC within their respective jurisdictions. Wielding power together, “the report signals to cryptocurrency market and industry players that increased scrutiny may be on the horizon.”