Federal regulations and stable coins
Among the fastest-growing forms of cryptocurrency are stablecoins, which use blockchain technology like Bitcoin and ethereum. Stablecoins are distinct, though, because they are pegged to a government-backed currency, like the dollar, or to gold. With each digital token valued at, say, $1, stablecoins are potentially better-suited to commercial transactions than are other cryptocurrencies that can fluctuate in value.
There are more than 200 stablecoins, worth nearly $130 billion — a six-fold increase from a year ago. The largest is Tether. The second-largest is USD Coin, which is issued by the financial services firm Circle.
The Associated Press spoke recently with Dante Disparte, Circle’s chief strategy officer, about the uses of stablecoins and the federal regulations they may face as digital currencies gain greater visibility.
What are the benefits of a digital currency? What value, for example, does someone get from USD Coin that they can’t from Venmo or from other ways of exchanging value?
Venmo only works if other people use Venmo. A Venmo payment may not converse with a Visa payment or may not converse with a Whatsapp payment and so on. That’s where the email analogy goes a long way: How useful would Gmail be if a Gmail user couldn’t email a Hotmail user or a Yahoo user and so on? USDC, Circle’s digital currency, is a $35 billion digital currency and growing. It has cumulatively powered $1.5 trillion worth of transactions.
What kinds of transactions are these? Visa has enabled USDC across 70 million merchants on the Visa network as a settlement option. Companies like Moneygram recently announced a partnership with USDC to enable remittances using USDC that have a cash-in-cash-out point at Moneygram locations around the world.
What are the other ways in which stablecoins can be used for payments? You could program a micro payment and send a very small amount of money to someone. For example, as a journalist, wouldn’t you like to get a penny for every “like” of an article that you post? With today’s traditional payment standards, the penny for every “like” is not possible because to send a penny would cost more than the sum of money that would be sent.
How are you addressing the increasing regulatory focus on cryptocurrencies in Washington?
Our company is comprehensively licensed across the U.S., comparable to major payments companies that we compete with. What we have also signaled is the intention of becoming a digital commercia bank ahead of the President’s Working Group on Financial Markets issuing its recommendation that stable coin issuers should, in fact, be banks. So we’re in broad agreement on the direction of these innovations.