On the Road to Adoption, Stablecoin Issuers Are Positioned to Be Future Banks


Experts predict that stablecoins will grow in popularity, but rule the only way for the industry to fulfill its full potential?

There’s no doubt that the crypto market has grown from strength to strength in 2021, as seen by the industry’s total capitalization recently surpassing $3 trillion, although for a brief period.

Stablecoins, a type of crypto with its value pegged to a fiat currency, has seen a surge in popularity in recent months, owing to their ability to help investors get their feet wet with digital currencies while removing many of the core issues — such as daily price volatility — that currently plague the crypto market.

The stablecoin industry has grown by 500 percent since 2020, from a total market capitalization of roughly $20 billion to over $125 billion. As one might expect, authorities around the world have taken note, to the point where the Biden administration is working to create a bank-like regulatory framework for stablecoin issuers.

Even though proponents of digital currencies are notorious for their anti-regulatory position, stablecoin issuers such as USD Coin (USDC), Circle CEO Jeremy Allaire recently expressed a pro-regulatory stance on the matter. In a recent interview, he noted that measures to regulate dollar stablecoin issuers at the federal level in the United States were a step forward for the industry’s development. “There’s a strong realization that as these payment stablecoins gain in popularity, they may be able to scale up to internet-scale quite quickly,” Allaire said.

Is it possible to move forward by enacting regulations?

When contacted by CoinDesk, a Circle spokesman stated that the company has long supported the US Congress adopting federal oversight for stablecoins, noting that “the quick scaling and strategic necessity of this to dollar competitiveness in the age of crypto and blockchains are vital.” We also recognize that similar to the creation of the internet, people everywhere will only be able to tangibly benefit from public blockchains through a rigorous public-private sector collaboration.”

The circle will continue to welcome any regulation that serves to protect consumers and businesses while also promoting innovation and development that promotes economic competitiveness and national security, according to the spokeswoman. “We believe this will result in a financial system that is dramatically more efficient, safer, and resilient,” they stated.

As calls for regulations gain traction, Ryan Matovu, the CEO and founder of Ardana, a Cardano-based asset-backed stablecoin protocol, and decentralized exchange, believes that the different stablecoin models in the space, as well as the spectrum of decentralization they exist along, must be acknowledged.

“Regulation on centralized custodial-type stablecoins makes sense,” Matovu explained, “since they operate within the traditional finance area of holding fiat U.S. dollars in accounts.” Decentralized stablecoins fall outside of this and those that live only on the blockchain should be viewed as peer to peer platforms rather than ‘issuers.'”

Is it a foregone conclusion that oversight will occur?

According to Steven Parker, CEO of cryptocurrency wallet software Crypterium and former general manager of Visa’s Central and Eastern Europe network, there is no future stablecoin environment that does not result in laws that are at least on par with the standards that banks face today.

Sir John Cunliffe, the Bank of England’s deputy governor, recently stated that the sustained rise and use of digital currencies could result in a massive financial crisis. Parker continued, ”

“Policymakers’ reaction to Libra, now Diem, a stablecoin, was swift and had a significant regressive impact on its adoption. Anyone who believes that regulators will just allow a new unregulated currency to take the lead in economic finance does not understand how financial regulation works. There is a fight for regulatory control, but once that is settled, stablecoins, their inventors, and managers will be heavily controlled.”

Not everyone believes that further regulations are necessary. According to Steve Gregory, CEO of’s US division, not all stablecoins are made equal, and unlike banks, they are not backed by the full faith and credit of a sovereign nation such as the United States.

The exponential growth rate of stablecoin acceptance, on the other hand, appears to show that the market is unaffected by the lack of regulation surrounding stablecoins. “Ultimately, much like how crypto exchanges work, in the future, there will be two types of stablecoin issuers: those that purposefully avail themselves of regulated jurisdictions and offer transparent accounting, clear rules for redemption, and investor protections in one basket, and those that have a robust secondary market but remain functional without clear rules that may be synonymous with financial insanity,” Gregory said.

According to Gregory, the first basket would likely be used by licensed financial institutions to engage in crypto-specific financial products, while the second will be used for cross-border trading, peer-to-peer marketplaces, and access to offshore exchanges.

Finally, when it comes to governing the stablecoin market, Gregory feels that the free market should be allowed to run its course, allowing regulated stablecoins to find their position in the global economy and flourish accordingly. “Overall, it’s a global asset class, and various restrictions in each particular country make it impossible to adapt the utility of stablecoins into a legal framework,” he says, adding that unregulated stablecoins will continue to expand and evolve into their niche.

The way forward

The Biden administration appears to be working on a new “special-purpose charter” for stablecoin issuers, thereby putting them in the same category as banks, as part of its long-term intentions. In this regard, Allaire feels that the specifics of a crypto company’s bank charter will need to be sorted out over time so that the laws are understandable to stakeholders in this emerging field.

It’s also worth mentioning that stablecoins have become a major topic of discussion among authorities in recent months. The US Treasury reportedly held a series of meetings in September to look into the hazards that stablecoins offer to their users as well as the financial system in which they operate.

The Author

Samuel Adeshina

Samuel is a financial reporter whose interests include blockchain, market, business, insurance, and Crypto to provide relevant information to all interested.