Janet Yellen, the U.S Treasury Secretary is today meeting with a working group that consists of the SEC, the Federal Reserve and the CFTC to discuss stablecoins.
Yellen has also invited the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation to the meeting.
Janet Yellen, the Secretary of the U.S Treasury Department, is today set to meet with top U.S regulators to discuss stablecoins and the role they could play in the country’s financial system. In an announcement, the department revealed that it would also invite other regulators involved in the financial industry as it seeks to assess the benefits and mitigate the risks stablecoins pose.
The July 16 announcement revealed that Yellen would convene the President’s Working Group on Financial Markets (PWG) today. This group consists of the heads of the Securities and Exchange Commission, the Federal Reserve and the Commodity Futures Trading Commission. In addition, Yellen invited the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation.
Bringing together regulators will enable us to assess the potential benefits of stablecoins while mitigating risks they could pose to users, markets, or the financial system. In light of the rapid growth in digital assets, it is important for the agencies to collaborate on the regulation of this sector and the development of any recommendations for new authorities.
The meeting comes at a time when the stablecoin sector is becoming increasingly critical to the crypto industry. Stablecoin supply has now surpassed $110 billion. Tether (USDT) holds close to 60 percent of this market, despite being marred in controversy over its backing and alleged market manipulation. Circle Financial’s USDC is the second largest at just below 25 percent, with the Binance USD (BUSD) accounting for about 10 percent.
Stablecoins take center stage
Stablecoin growth in the past quarter was phenomenal, facilitating $1.7 trillion in transactions in Q2. This represented a 1,090 percent rise year-over-year and an almost 60 percent rise since Q1. They are on pace to process $5.5 trillion by the end of the year according to data analysis and research platform Messari.
And while it’s companies like Tether and Circle that have dominated, decentralized stablecoins are also carving out a niche in the sector. As Ryan Watkins, a researcher at Messari revealed recently, decentralized stablecoins hit an all-time high market share at 10 percent.
Zooming into the subsector of decentralized stablecoins, we see continued progress as decentralized stablecoins continue to win share from centralized stablecoins.
In the beginning of Q2 decentralized stablecoins reached an all-time high ~10% of the total stablecoin supply. pic.twitter.com/9zNdzb8zgp
— Ryan Watkins (@RyanWatkins_) July 14, 2021
In this market, DAI is still the king. Although its market share took a hit this year, partly due to the rise of Terra’s UST, it still commands an impressive 61 percent share.
The stablecoin industry is fully welcoming more regulatory oversight, one of the titans of the sector told the Wall Street Journal. Jeremy Allaire, the head of Circle FInancial, believes that the industry needs clear standards if it’s going to thrive. “I think it’s good news,” he said of today’s meeting.
This is not the first time that the President’s Working Group is meeting to deliberate on issues to do with stablecoins. In December, the PWG issued a statement on stablecoins, suggesting, among other things, that they should be backed in a 1:1 ratio. Issuers should also hold high-quality, U.S dollar-denominated assets and hold them at regulated U.S institutions.
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