This week, the President’s Working Group on Financial Markets, a group that includes several financial regulators, met to discuss stablecoin legislation, with an anonymous official telling Coindesk the legislative package could become law by the end of the year. The source said it would define stablecoins for the purposes of U.S. regulation and address how they’re used.
The stablecoin market has ballooned in recent years with the largest stablecoin tether now boasting a market capitalization of almost $70 billion. Stablecoins— cryptocurrencies that are price pegged to traditional currencies such as the U.S. dollar—are used to facilitate payments and ease people’s entry to certain cryptocurrency exchanges that don’t support direct deposits.
This year, the collapse of the so-called algorithmic stablecoin terraUSD that used a cryptocurrency called luna to maintain its U.S. dollar peg sent shockwaves through the crypto market and galvanized regulators to better police the technology and protect users.
TerraUSD and luna’s collapse shook the confidence of many crypto investors that have been further rocked by many crypto lending companies suspending withdrawals in recent weeks in the face of spiraling bitcoin, ethereum and crypto prices.
In Europe, lawmakers this week secured an agreement on tough new rules designed to ensure stablecoins maintain ample reserves to meet redemption requests in the event of mass withdrawals.
E.U. lawmaker Stefan Berger said the rules would “put order in the Wild West of crypto assets,” adding the rules “will provide legal certainty for crypto-asset issuers, guarantee equal rights for service providers and ensure high standards for consumers and investors.”