Are regulated stablecoins the future of payments?
Global regulators have been busy over the past few months announcing new or draft regulations around digital assets. With the help of reputed investment management firms, investors might be able to make something out of their assets. Stablecoins seem to be one of the priorities for lawmakers. Since October 2021, stablecoins have grown approximately 500%, according to the Biden Administration.
US’s Senate Banking Committee member Sen. Patrick Toomey said: “Stablecoins have the potential, among other things, to speed up payments and automate transactions.“, however, it comes with risks and uncertainty (e.g., unclear pegged assets, money laundering, terrorist financing or circumvention of sanctions). Unsurprisingly, stablecoins have become the prime target of regulators, as you can see below:
- EU: 25 March 2022, the MiCA Bill moved forward, in the current draft of the Bill, stablecoins can be classified as e-money tokens (single fiat backed) or asset-referenced tokens (multiple asset pegged). E-money tokens could be issued by banks or EMIs, while asset-referenced tokens could be issued by banks or authorized entities under MiCA, as summarized by Allen & Overy, however it is still subject to changes.
- UK: 4 April 2022, the Government confirms plans to bring stablecoins used as a means of payment, the regulator FCA will set out the detailed requirement in rulebooks.
- US: 6 April 2022, the US lawmaker proposed The Stablecoin TRUST Act to give stablecoin issuers the choice between obtaining (1) the Office of the Comptroller of the Currency (OCC) license, (2) a state money transmitter or similar license or (3) a traditional bank charter.
One way or another, a stablecoin issuer will likely have to apply for a license under the new legislative proposals, or become a bank. Banks and pioneers are already moving as we speak. Last month, Australian bank ANZ teamed up with Fireblocks to issue Australian dollar-backed stablecoins, 30 million has been minted by March.
Last week, Stripe has chosen to use our partner Polygon’s networks to offer stablecoin USDC as payments, and Twitter will use its service to pay content creators in USDC, making payments faster and cheaper while allowing unbanked users to monetize their content. As digital payments become increasingly prevalent across the internet and in real life, it is important for businesses to adopt new ways of making sure customers, visitors, clients, etc. can be given that choice on how they can be paid as well as pay others. A piece of technology linked to this way of paying, like the use of EFTPOS machines, has helped businesses make things more streamlined and safe for those who need it when paying with things like their cards and phones.
As a technology infrastructure provider, our token management solutions are already used by several stablecoin projects in the EU, the UK, and in the USA. For example, as early as 2020, we announced an interbank settlement coin project with a consortium of French banks (BNP Paribas, CACIB and Caisse des Dépôts).
We are prepared to provide technology with a 4-year track record to enable entities to issue compliant stablecoins via the ERC-3643 standard, filling the gap between regulation and blockchain by ensuring that issuers have full control over stablecoins as required by regulators.
The era of regulated stablecoins is coming, we are excited to see it evolving quickly, and we will share some exciting news soon, stay tuned!