The crypto market on September 23 finally saw a rebound after Bitcoin reached over $44,000 from $39,500 within 24 hours.
Analysts believe that Fed’s latest monetary policy is one of the fundamentals driving the rebound. Yesterday, the Federal Reserve stated that if the economic recovery in the United States can continue to make the expected progress, it will likely slow down the pace of banks’ debt purchases.
The slow down in debt’ purchases would likely result in the reduction of interest rates, which currently range between 0% To 0.25%. While Fed Chairman Powell called the current high inflation situation “temporary”, the market again saw potential in cryptocurrencies against the depreciating US Dollar.
However, the U.S. financial regulators are constantly scrutinizing the crypto market and unfortunately, stablecoins have been bearing the brunt of it.
Recently, chairman of the US SEC Gary Gensler compared stablecoins to casino poker chips, and the US Treasury Department and the Federal Reserve are worried that stablecoins “may disrupt the financial system” and are jointly preparing a report highlighting the risks of stablecoins.
One of the regulatory concerns regarding stablecoins is their effect on the money market funds. Many issuers of stablecoins peg the coins against a large amount of commercial paper or other short-term securities, such as U.S. Treasury bonds or certificates of deposit.
If the crypto industry plunges, the market could suddenly see a large withdrawal of funds resulting in the crash of the financial system.
The Ministry of Finance and other regulatory agencies also hope to control illegal activities related to stablecoins since many of them are used for illegal financial activities by hidden entities overseas.
Taking account of all the statements above, the Treasury Department, the Federal Reserve, and the Securities and Exchange Commission are all eyeing stablecoins.
Judging from the vigilant attitude of the regulation towards stablecoins, the game between the upstart and the old forces is still contradictory that might squeeze stablecoins out of the equation.