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Crypto Industry Could Surge in 2022 on Stablecoin Regulations: Analysis

The year 2022 may be when regulatory frameworks are rolled out in the United States and globally, paving the way for greater crypto adoption. At the forefront of these legislations will be stablecoins since they facilitate direct trading and have grown exponentially over the past year or two.

Anti-crypto Senators in the U.S. have repeatedly slammed stablecoins claiming that they pose a risk to the economy. One even said that “they’re propping up one of the shadiest parts of the crypto world; DeFi,”

Although this view is misinformed and somewhat extreme, most policymakers and industry leaders agree that some form of regulation is necessary for the crypto ecosystem to flourish.

The Year of Regulations

There are a number of issues that lawmakers would need to address to effectively regulate stablecoins without stifling innovation and the wider industry. According to a recent Forbes report, there needs to be a clear differentiation between stablecoins and other crypto assets.

Stablecoins should not be lumped in with other decentralized crypto assets. Crypto needs tailored regulations, not the same archaic ones applied to traditional finance, as recently pointed out by Coinbase Chief Financial Officer Alesia Hass at a Congressional hearing in December.

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Monetary competition is a good thing, and regulators will be able to oversee this financial, technological revolution as opposed to oppressing it.

Additionally, Paxos CEO, Charles Cascarilla, cautioned that the U.S. dollar could lose its world currency reserve status if neither regulated stablecoins nor a dollar-based CBDC is approved soon.

The report noted that tax, compliance, and reporting obligations are currently a burden. This could all be solved with a solid regulatory framework that encourages the use of stablecoins and crypto assets rather than labeling them as ‘criminal’ as some Senators that will remain nameless repeatedly do.

It is likely that some form of regulation will be rolled out this year, and it could propel the crypto industry to new heights providing it is proactive.

Stablecoin Ecosystem Outlook

Stablecoins currently comprise a little over 7% of the entire cryptocurrency market capitalization. According to CoinGecko, the current combined market cap for stablecoins is $168 billion, and there is nearly $60 billion in daily trading volume.

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Tether is still the industry leader with 78.4 billion USDT in circulation or about 46.6% of the total. A full audit is still elusive, which may ease some of the pressure mounting on the sector.

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Tags: Regulations Stablecoins

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