In the eyes of Washington policymakers and regulators, stablecoins are perhaps the most satirically named creation in the cryptocurrency arena. Similar to bitcoins, stablecoins are also digital currencies. They try to keep their value stable through government currencies like the euro by obtaining financial support from short-term debt and bank reserves.
What are stablecoins?
Stablecoins are linked to a current government-supported currency. To ensure they maintain the value, stablecoins maintain many assets in reserve like short-term securities. Stablecoins facilitate how people transact with cryptocurrencies.
Stablecoins are gaining popularity due to their affordability and practicality. They are an easy way to conduct transactions in cryptocurrency. In a couple of years, stablecoins transformed from nonexistence to a $120 billion market. Most of that growth occurred in the past year. However, most of them are structured like a risky investment instead of the dollars they claim they are. At the moment, many cryptocurrencies are not meeting regulatory standards.
The most talked-about topic in Washington financial groups today is lobbying to either avoid regulation altogether or push for the profitable side. How government officials handle the shady questions regarding cryptocurrency, a fairly new player, will set the tone for a fast-growing tech. This is going to grow very quickly and will eventually trigger the writing of the first draft on regulations that govern cryptocurrency.
The argument about how to handle stablecoins is linked to another sensitive topic: should the Federal Reserve offer its own form of digital currency? This will compete with stablecoins offered in the private sector.