More than US$ 130,000 million are currently invested in cryptocurrencies that keep parity with the dollar (stablecoins), a volume that worries world economic institutions such as the IMF and the United States Federal Reserve (FED), which seek to limit their circulation considering them dangerous for financial stability.
Stablecoins have been one of the main access routes to the crypto world in recent years, especially for small investors, who seek refuge from inflation and do not want to risk buying others such as Bitcoin or Ethereum, due to the volatility of their prices.
However, they have not been without their dangers, as several projects have had problems or even disappeared in the last year, such as the case of Terra/USDT, which caused the disappearance of about US$ 20,000 million in a few days at the beginning of May 2022.
On this point, the IMF Board of Directors pointed out days ago its fear that a wide adoption of crypto assets “could undermine the effectiveness of monetary policy, circumvent capital control measures and exacerbate fiscal risks, in addition to great implications for the long-term international monetary system.
Hence, the idea of issuing a CBDC (Central Bank Digital Currency) that allows the US government to have a crypto dollar is gaining more and more strength.
It is that, unlike the US dollar, the issuance of stablecoins linked to the dollar depends on the decisions of companies -Tether, Circle or Maker- through blockchain technology that, no matter how many arguments they put forward in favor of the security and transparency of These operations are still a sort of “secondary issue” of dollars that the Fed cannot control through its monetary policy instruments.
“If regulation is slow to arrive and crypto assets become a greater risk for consumers and a potential for financial stability, the option to ban them (cryptocurrencies) should not be ruled out.”IMF Managing Director Kristalina Georgieva noted in a recent interview with Bloomberg.
The importance of stablecoins in the crypto industry responds to the fact that, on the one hand, they are the means of exchange through which volatile cryptocurrencies are bought or sold, such as Bitcoin or others, and, on the other, they are a refuge in scenarios of high uncertainty in prices, as has been the case for a year and a half.
In this sense, despite the collapse of the crypto market since November 2021 -the total market capitalization went from US$ 3 trillion to close to US$ 1 trillion currently (-66%)-, the stablecoins continued to fall much more bounded.
“Still without recovering the volumes of April last year, the capitalization of the global stablecoin market multiplies by 4 the volume of two years ago”Juan Pablo Fridenberg, director of Public Affairs at Lemon, told Télam.
Currently there are four stablecoins that account for 98% of the market: USDT (US$71 billion capitalization), USDC (US$44 billion); BUSD ($8.5 billion) and DAI ($5.5 billion).
The case of BUSD -the stablecoin of Binance, the world’s largest crypto exchange platform- became relevant in recent weeks after the United States Securities and Exchange Commission (SEC) forced the company ( Paxos) that issued the tokens in that country to cease its activity, for selling BUSD as an “unregistered security”.
This caused more than $10 billion to flee that cryptocurrency in the last two weeks.
“The attention of governments and regulators to the objective data of the increasingly growing adoption of crypto assets in general, and stablecoins, in particular, is normal”assured Fridenberg, and admitted that a scenario of “hyper-regulation that tends to redefine or limit some ecosystems such as stablecoins” must not be ruled out.
For Alejandro Rothamel, Ripio’s Chief Legal Officer, the regulation of stablecoins “has been a subject in the pipeline” for several years, although the episodes of “mismanagement and scams of many large companies” in 2022, such as the cases of FTX, Celcius and others, which left millions of users affected around the world, made them gain more strength.
“The focus of regulation must be placed on transparency, disintermediation and user protection”Rothamel told Télam, adding that they are “optimistic” about regulation in Latin America, since the bills on which they have been consulted in the region “are gradual and tend to fill gaps instead of trying to regulate everything in one once and forever, which could lead to excesses”.
In Argentina, the president of the Central Bank, Miguel Pesce, assured days ago that crypto assets should be treated “as similar to games of chance, and in that sense, our goal should be to isolate its effects from the traditional financial system“.
“We must focus on addressing data gaps to ensure effective monitoring,” Pesce said while speaking at the first G20 Finance Ministers and Central Bank Governors meeting in India.
In any case, for Rothamel, stablecoin trading volumes in Argentina “are practically insignificant compared to the data published on foreign currency trading.”
“The regulator knows this and we believe that the measures it will take are closer to user protection than to a ban,” Rothamel predicted.
