While the SEC continues to track crypto exchanges, the United States has decided to put the potential of stablecoins at the service of their economic policy. This is what we deduce from the speech of the President of the Federal Reserve of the United States, Jerome Powell, who recognizes that stablecoins are a form of currency. What explains this sudden US interest in stablecoins?
The FED confirms the potential of stablecoins for the future of finance
If cryptocurrencies face severe regulation in the USA, the Fed now recognizes stablecoins as a form of currency. This means that work and projects related to stablecoins in the USA will no longer be done without the eyes of the institution. In his statement, Jerome Powell, Chairman of the Federal Reserve of the United States, said:
“We consider stablecoins as currency. […] We think it would be appropriate to have a fairly strong federal role on what happens with stablecoins in the future. Allowing yourself to have a minor role and allowing the creation of a lot of private currencies at the state level would be a mistake. »
In fact, while cryptocurrencies are fundamentally subject to volatility, stablecoins have a rather fixed price, backed by that of a fiat currency which can be the dollar, the euro, the yen, etc.
Stablecoins are trusted assets that create a secure bridge between fiat currencies and the crypto market and stand out for their unparalleled ability to facilitate domestic and cross-border payments and money transfers.
The comment by the head of the FED, Jérôme Power, therefore appears quite simply as an admission of their potential and, by extension, that of cryptocurrencies for the future of finance. By recognizing them as a form of currency, the institution affirms its determination to occupy a central place in the economy of stablecoins right now.
Recognition of stablecoins: the United States in a logic of catching up?
When we follow the news of MasterCard, PayPal and MoneyGram and the impact of their recent initiatives in the crypto world, we have the impression that the United States is in a logic of catching up on the question of stablecoins.
For example, MasterCard is currently working to link stablecoins, CBDCs and tokenized bank deposits in payments. The company recently created a forum bringing together several big names in the crypto industry including Ripple to kick off discussions about CBDCs.
For its part, PayPal now has its 100% regulated stablecoin, the PYUSD which is issued by the company Paxos while MoneyGram now has Stellar among its board members.
The interest of these companies in stablecoins clearly indicates that these digital currencies will play a central role in the new format of the global economy being built. It is therefore normal that the United States hasten to take measures to control their emission and their regulation.
Stablecoins: an American policy to preserve the status of the American dollar?
Do you know that, according to statistics published by the IMF, from 1999 to 2022, the share of the American dollar fell from 70% to 58% in the world’s foreign exchange reserves and that it fell at the same time in the reserves held by foreign central banks?
This reflects a desire by governments and central banks to reduce the influence of the dollar on their economies and to diversify their portfolios. And that’s not to mention that we’ve been hearing rumors for a while about the creation of a new payment system by the BRICS to put an end to the dollar. Clearly, this is not good news for the dollar.
In this context, stablecoins could be used to breathe new life into the US dollar, whose hegemony has for some years been subjected to the severe test of the gradual dedollarization of international trade.
That being said, the importance of stablecoins for the status of the dollar has been clarified by several crypto industry executives, such as Brian Brooks, ex-CEO of Binance.US and chief legal officer of Coinbase.
For Brooks, dollar-backed stablecoins can help the dollar retain its status as the world’s reserve currency and help fight global dedollarization.
Brian Books tells CNBC that “citizens in high inflation countries demand a lot of dollar-denominated products to protect their money” and “Stablecoins are the best solution in these countries where it is impossible to open a bank account in dollars”.
For the framework, the creation by the American government of a “framework for dollars to support stablecoins in a regulated way” will promote “Rising demand for dollar-backed stablecoins”.
It will be, he adds, “a way for us to make the dollar relevant again as governments around the world seek to decouple from the currency”.
In summary, the purpose of recognizing stablecoins as a form of currency is clear. As Brooks indicates, “It’s really a pretty big political issue. It’s not about crypto. It’s about the role the United States plays in the financial system.”.
SEC still at war with stablecoins
Until then, the FED’s discourse on stablecoins is fundamentally opposed to that of the Biden administration, hostile to cryptocurrencies, and that of the SEC, which has continued to hunt down crypto exchanges since the fall of FTX.
Visibly stung by the millions of dollars lost by investors on crypto platforms, US regulators are also after stablecoins. For example, the NYDFS recently forced the Paxos company to halt the issuance of BUSD, Binance’s stablecoin, after labeling it a security.
Thus, if stablecoins are to thrive in the United States, the FED and US regulators will need to align themselves on a common definition of securities. Furthermore, it will be hoped that the SEC does not use stablecoins as a weapon to “kill cryptocurrencies”as noted by Brian Books.
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