Chief strategy office and head of global policy at Circle, Dante Disparte, said that the time to act is now, amid a market correction but with continued rapid growth. He added that crypto regulation needs to balance stablecoin risks with “establishing clear rules of the road such that the USD continues to be the leading digital currency of the internet can advance U.S. leadership and economic competitiveness.”
The company stated that the broader market downturn had vindicated policymakers that have been sounding alarm bells about excessive risks in the sector. The primary triggers for this 70% market correction were over-leveraged positions, excessive lending and borrowing, and the collapse of the Terra stablecoin ecosystem.
Disparte outlined 19 principles that reflect Circle’s experience operating a regulated global stablecoin.
The use of money should be free regardless of its form factor, he stated before adding that a stablecoin is a “digital bearer instrument” entitling the holder to the redemption of $1.
He stated that preserving privacy should be a stablecoin design issue, but it is doubtful that banks will agree with that one. “Transparency, accountability, and harmonized risk disclosures” are essential preconditions of market trust and consumer protection, according to Circle, which the regulators are likely to support.
Stablecoins are not supposed to compete with bank-issued currencies but complement them by offering more transaction options and flexibility. They can also co-exist with central bank digital currencies (CBDCs).
As with traditional banking, Circle advocates for applying anti-money laundering (AML), countering terrorism financing, sanctions requirements, and know your customer (KYC) standards.
Additionally, stablecoins should have assured cash and dollar-backed asset compositions and liquidity. Circle also promoted direct custody of such assets at the Federal Reserve.
In light of Europe’s Markets in Crypto-Assets Framework (MiCA), “U.S. leadership is needed to avoid trans-Atlantic or global misalignment while harmonizing standards for stablecoins,” it stated.
Finally, it stated that regulated stablecoins should be treated as cash or cash equivalents in the United States to promote clarity and consistency so that households and companies alike can use them with confidence.
These were some of the principles outlined by the company, and most of them should be in line with any federal legislation when it is finally rolled out.