Bank of America Sees Stablecoin Regulation as Catalyst to Mass Adoption

Stablecoins are viewed as a systemically important asset with a market value of around $141 billion.

Nov 23, 2021 at 12:58 p.m. UTC
Updated Nov 23, 2021 at 3:12 p.m. UTC

Will Canny is CoinDesk's finance reporter.

The publication of the U.S. Treasury report, “Report on Stablecoin” (RoS), earlier this month is an “indication of urgency” for the regulation of stablecoins, given their potential to become a viable payments method, Bank of America said in a research note published on Tuesday.

  • Institutions are waiting for rules to be defined before increasing exposure to digital assets, and a “regulatory framework should incentivize payments companies to integrate blockchain technology and stablecoins into their platforms,” the bank said.
  • Mastercard, Signature, Visa and Western Union could see an increase in market value from stablecoin regulation, Bank of America said. It has a buy rating on the stocks of those companies.
  • Oversight is needed for stablecoins, because they are now a “systemically important asset” with a market value of around $141 billion with a quarterly transaction volume of over $1 trillion in 2021, the bank said.
  • Despite the size and growth of the market, stablecoin issuers aren’t regulated under a sweeping framework and “provide varying levels of transparency into the composition of reserves that back their stablecoins,” BofA said in its report.
  • The Treasury Department’s report notes that the “potential for rapid stablecoin growth creates systemic risk” as “digital assets and traditional financial markets are more connected than many realize.” The stablecoin report recommended that the U.S. Congress pass legislation swiftly to integrate stablecoins into the banking system, allowing for federal oversight.
  • If regulators decide that all stablecoin issuers are required to be insured depositories, it could lead to banks issuing their own stablecoins, Bank of America added.
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