The U.S. Senate Banking Committee met on Tuesday to hear from stablecoin experts as they consider possible regulation of the assets.
What happened: Stablecoins have been under scrutiny ever since big names in finance accused Tether of not holding enough USD to truly peg their coin price to the Dollar.
- If true, the allegations — which Tether strongly denies — of a mismatch between the number of tokens in circulation and their US Dollar reserve could tank Tether’s price and leave retail investors holding the bag.
Regulators are now discussing what steps they should take to ensure stablecoins are properly backed by reserve to protect consumers.
Why stablecoins matter: Stablecoins, like Tether, Praxos and USDC offer an on-ramp to crypto without the volatility of other tokens.
- In theory, you can confidently hold stablecoins as you would cash, without paying significant fees or needing an institutional intermediary (like a bank).
What the Senate is saying: U.S. Senators hearing from stablecoin experts offered an overwhelmingly negative assessment of the technology, suggesting the projects were little more than scams.
- Despite the critique, a timeline on regulating stablecoins is still unclear so don’t expect to see action anytime soon.
Big picture: Stablecoins are core to the promise of web3 and a world where we can control our finances outside of traditional banks (and their high fees). And regardless of what the U.S. government does, it’s unlikely that stablecoins, which can operate outside of the country and trade on decentralized exchanges, are going away.