As the global digital currency race heats up, Circle CEO Jeremy Allaire thinks the broader stablecoin adoption expected to come with regulatory clarity from Washington can give the United States a needed edge in minting the financial system of the future.
Testifying along with five other crypto leaders at Wednesday’s landmark congressional hearing, the digital payment provider’s chief executive officer said the U.S. is beating China in stablecoin transactions with trillions of U.S. dollar-backed payments carried out, compared to $10 billion completed by China’s central bank in its experimental digital yuan program, though clearer rules for mass use are needed to sustain this pace.
“This has the potential to grow at a very significant speed around the world and benefit the U.S. dollar and benefit American businesses,” Allaire told lawmakers. “And I think the primacy and development of this infrastructure is a national security and economics priority for the United States, and we need to get going on it right now.”
Despite larger transaction volumes, U.S. stablecoin issuers lack the key support from policymakers that is crucial for wider adoption, while China’s central bank has pushed forward with real-world trials of digital currencies. As the stablecoin market grows rapidly, reaching over $140 billion as of November, key players are eager for a nod from Washington as watchdogs inch closer towards support for institutional use.
“The United States and the U.S. dollar are winning the digital currency space race today,” Allaire, whose Circle is the second-largest stablecoin issuer, told members of Wednesday’s meeting, citing trillions in transactions.
A central bank digital currency (CBDC) tracker and database from the Atlantic Council, a nonpartisan think tank on international affairs, however, states the U.S. is the furthest behind in digital currency progress among countries with the four largest central banks.
“In the long term, the absence of U.S. leadership and standards setting can have geopolitical consequences, especially if China maintains its first-mover advantage in the development of CBDCs," Atlantic Council researchers wrote.
While Circle has come out against the launch of a centrally-managed CBDC — which differ from stablecoins because they are privately issued — the company has supported the Biden administration’s proposal to regulate stablecoin issuers as banks, viewing the move as a step forward for the industry.
“We think this represents significant progress in the growth of this industry,” Allaire previously told Yahoo Finance. “There's a real recognition that as these payment stablecoins grow, they could grow at internet scale relatively quickly."
'Viable means of payment'
Flagship financial institutions are also bracing for regulation and the potential for institutional use.
Bank of America (BAC) sees developments in the regulatory sphere around stablecoins as a good thing for payment companies, recently identifying Mastercard (MA), Signature (SBNY), Visa (V) and Western Union (WU) as potential beneficiaries.
“We expect regulatory clarity to increase stablecoin use as a viable means of payment, likely driving retail adoption,” Bank of America global research analysts wrote in a recent note.
“Stablecoin regulation is a significant first step toward a comprehensive regulatory framework that encompasses the digital asset ecosystem,” BofA said. “We view a comprehensive regulatory framework as a catalyst to mass adoption of digital assets.”
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc