The supply of the two major U.S. dollar stablecoins hit a record high

According to data from Glassnode, as of November 7, the supply of the two major U.S. dollar stablecoins USDT and USDC hit a record high. The circulating application volume of USDT exceeded USD 72.186 billion, and the circulating supply of USDC exceeded USD 34.291 billion.

The two largest and second-highest dollar stablecoins in market capitalization have also boosted the size of the entire stablecoin market. Behind this is the recent expansion of the total market value of the encrypted asset market led by Bitcoin . According to data collected by Coingecko, the current total market value of encrypted assets has exceeded US$3 trillion, while the total market value of stablecoins linked to mainstream international legal currencies such as the US dollar, euro, and British pound has exceeded US$142.9 billion.

The US dollar stablecoin still dominates the stablecoin market. One week before the market further expanded, that is, on November 1, the US Treasury Department just led the relevant agencies to release the “Stablecoin Report”, which summarized stablecoins and their related The activity brings systemic risks, and urges the US Congress to enact legislation as soon as possible to develop a comprehensive stable currency regulatory framework to ensure that payment-based stable currency issuers can be regulated like banks.

The release of this report did not trigger a major rebound in the crypto industry. Correspondingly, the market value of stablecoins has expanded as the crypto asset market becomes active again. Industry insiders believe that this may be because the content of the report does not emphasize the specific institutions that supervise stablecoins, but instead points to a longer-term path: Congressional legislation.

The market value of $3 trillion crypto assets pushes up the scale of stablecoins

When reaching a market size of 142.9 billion U.S. dollars, the overall market value of stablecoins that are linked to the legal currencies of various countries and generated from the blockchain network has expanded more than six times from the 20 billion U.S. dollars a year ago. U.S. dollar stablecoins are USDT and USDC. The former is issued by Tether, which has a dispute over reserves, and the latter is issued by the regulated financial technology company Circle. The two parties have been in a market-scale competition.

According to the data of Glassnode, as of November 7, the circulating supply of USDT exceeded 72.186 billion U.S. dollars, breaking the threshold of 70 billion U.S. dollars. At the same time, after USDC issued an additional 1 billion US dollars, its circulating supply reached 34.291 billion US dollars. The market value of USDC is close to half of USDT, and the circulation level of the two US dollar stablecoins with the largest market share once again hit a record high. Of course, it also supported the market value of the entire stablecoin sector to a new high.

The supply of the two major U.S. dollar stablecoins hit a record high

Coingecko data shows that the total market value of stablecoins exceeds $142.9 billion

Historically, huge price fluctuations in the crypto asset market have often led to the issuance of stablecoins. Due to the formation of price anchors with mainstream legal currencies, stablecoins play a role of payment tool and purchasing power in the encrypted asset market. Its additional issuance usually means greater financing needs for encrypted asset projects and more transaction needs.

The further expansion of the total market value of encrypted assets is an important driving force for the expansion of the stablecoin market. At present, the total market value of the crypto asset market led by Bitcoin has exceeded US$3 trillion, far exceeding US stock-listed companies Microsoft (2.53 trillion) and Apple (2.47 trillion).

In the past 24 hours, Bitcoin (BTC) has risen by 6.4%, reaching a maximum of US$66,500, which is close to the recent historical record of US$67,000. Ethereum ( ETH ), which ranks second in the crypto asset market in terms of market value , has a high price. It rose by nearly 3% in 24 hours, reaching a record high of $4,768. At the same time, BNB and SOL, which rank third and fourth in market capitalization, both rose more than 20% in the past week.

Crypto broker IG Markets analyst Kyle Roda believes in an interview with the media that the decline in the actual yield of traditional financial assets and economic inflation expectations have increased the attractiveness of gold and crypto assets. Financial institutions want to participate. Regulators His actual actions did not put too much pressure on the crypto asset market. “We have almost passed the turning point. It (crypto assets) is becoming a part of the entire financial system. (Investors have become) very, very difficult to extricate themselves.”

Regarding the stablecoin market, Morgan Stanley’s chief cryptocurrency strategist Shiner Shah said in a report that the banking industry is likely to try to capitalize on the market’s demand for stablecoin deposits in the context of exponential growth in the market. Since the notable function of stablecoins is to provide access to crypto deposit interest rates and decentralized finance (DeFi), “crypto asset lenders provide more than 5% interest for some of these tokens, which in turn will cause regulators and governments to make Respond.”

The US “Stablecoin Report” did not play a role in market restraint?

At the very least, the regulators under the US government have responded to the ever-increasing market size of stablecoins. On November 1, under the leadership of the U.S. Department of the Treasury, the President’s Financial Markets Working Group (PWG), the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) jointly released a long-awaited “Stablecoin Report” (hereinafter referred to as “Report”).

The “Report” recommends that the United States should form comprehensive federal legislation on stablecoins, including requiring stablecoin issuers to become “Insured Deposit Institutions (IDI)” and be included in the system of regulatory agencies like banks. This will enable the issuer of stablecoins to comply with the requirements of the relevant capital and liquidity standards and comply with the provisions of the Federal Deposit Insurance Law. In addition, in order to address the important role of digital wallets, the report recommends that Congress need to require federal regulators to supervise custodial wallet providers, supervise entities that play a vital role in the operation of stablecoins, and restrict stablecoin issuers and commercial entities. Subordination to encourage competition and interoperability between different stablecoins.

The “Report” also summarizes the risks brought by stablecoins and related activities, including the loss of confidence in the value of stablecoins by investors or purchasers, the risks that stablecoins bring to traditional payment systems, and the systemic risks that stablecoins pose to the entire financial industry. And the concentration of economic power. In addition, PWG and other institutions also pointed out in the report that stablecoins pose illegal risks to financial integrity, including issues that are contrary to compliance with AML and CFT requirements. These risks have always been part of FinCEN, OFAC and the U.S. Department of the Treasury.

In response to the report that the U.S. Treasury Department has been urging to release, the encryption industry is more concerned about the specific departments and law enforcement basis for stablecoin supervision. Previously, there have been rumors that the U.S. SEC will become an important regulator of stablecoins.

However, from the content point of view, the “Report” does not give a clear answer, but describes the current regulatory enforcement dilemma. For example, the report highlights a significant gap in the authorities’ supervision of stablecoins used for payment purposes—the enforcement of the US Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) is limited to their respective jurisdictions. Within the jurisdiction of the SEC and CFTC, the “Report” recommends that stablecoin activities need to comply with the Federal Securities Law, Commodity Exchange Law and related regulations.

In the opinion of some observers in the encryption industry, the scope of supervision and the basis for law enforcement are a bit clichéd, and the major companies and persons in charge of the encryption industry have expressed inappropriate and opaque application of the law to the current basis for law enforcement and the enforcement actions of the regulatory authorities. the opinion of.

In this regard, the “Report” also made additional recommendations for supervision, that is, Congress should implement comprehensive legislation on the asset reserves, digital wallets, operational activities, and commercial competition of stablecoin issuers. While waiting for Congress to enact legislation, institutions such as the PWG recommended cooperation between federal financial institutions to resolve the risks of stablecoins within their respective jurisdictions. For example, the Consumer Financial Protection Bureau can take enforcement actions in accordance with the “Electronic Funds Transfer Law”, the “Consumer Financial Protection Law” and other laws; the Financial Stability Supervisory Commission may consider taking measures within its scope of authority to address stable currency risks, such as stabilizing Certain activities in the operation of the currency are designated as potential system payment, clearing and settlement activities, thereby incorporating these activities into the current regulatory system.

The US Treasury Department’s “Stablecoin Report” has been released for a week. The joking thing is that the stablecoin market has not stopped there. Instead, it has “rised up” as the crypto asset market becomes active. Of course, the report does not have a legally mandatory attribute, and it is difficult to evaluate the guiding significance of the advisory content to the regulatory agency.

In an interview with the media, Salman Bennet, the policy director of the cryptocurrency intelligence company Chainalysis, said that the report may have instructed regulators such as the SEC or CFTC to use their existing powers to open the situation, but this is not the case. Instead, it recommends a longer and more lasting path: Congressional legislation. The class’s concern is that if the legislation fails, “the PWG’s report will not be able to prompt the regulator to implement the necessary rules to fully address the risks detailed in the report,” such as insufficient liquidity, inability to redeem or illegal financing. And never realize that “opportunities have been released due to the widespread use of stablecoins.”

As for the Morrison & Foerster law partners who are concerned about the crypto industry, although the “Report” entrusts any major changes in stable currency supervision to federal legislation, it clearly indicates that various regulatory agencies are in cooperation with the SEC and CFTC within their respective jurisdictions. Exercise power together, “The report sends a signal to the cryptocurrency market and industry participants that more and more scrutiny may be coming.”

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