The Trump administration is planning to bring stablecoins, particularly those pegged to the USD, under regulatory control in order to domesticate this $227 billion market.
According to cryptocurrency advisor David Sacks, the Trump administration is expected to issue regulations controlling stablecoins, while also encouraging the development of this sector within the US. The focus is on digital assets backed by the USD, not only to strengthen the position of the greenback in the digital space, but also to drive the adoption of Bit and blockchain technology.
In a statement on CNBC on February 4, Sacks emphasized the desire to "bring this innovation home", as the stablecoin market is rapidly expanding, but a large portion of the Capital is still outside the US.
Currently, the stablecoin industry has a total market capitalization of an estimated $227 billion, with 97% of the market share belonging to USD-pegged stablecoins, notably USDT from Tether. Data from CoinGecko shows that USDT accounts for over 60% of the total stablecoin market capitalization. According to Sacks, stablecoins could become a tool to increase the global influence of the USD through digital platforms, while also creating a multi-trillion-dollar demand for US Treasury bonds, thereby supporting public debt and reducing long-term interest rates.
Previously, the White House had committed to protecting the status of the USD through an executive order signed by Trump on January 23. This order not only encourages the development of legally-backed USD-pegged stablecoins, but also prohibits the issuance and deployment of any form of central bank digital currency (CBDC). This reflects the Trump administration's clear direction in promoting stablecoins as a form of digital dollar alternative.
However, the stablecoin market in the US is witnessing differences in management approaches. USDC from Circle is issued and managed domestically, with the issuing organization claiming full regulatory compliance. In contrast, USDT from Tether faces numerous legal challenges, particularly in the European Union (EU), where it is classified as non-compliant.
Conversely, USDC has gained recognition in many major economies, including Canada and the EU. Notably, in July 2024, USDC will become the first stablecoin to comply with the EU's Markets in Crypto-Assets (MiCA) regulatory framework, opening up the possibility of legal expansion into traditional markets.
With USDT accounting for more than half of the total stablecoin market share, it is highly likely that the US government will focus on closely monitoring this asset, especially as the Trump administration is shaping a domestic regulatory framework. Tether CEO Paolo Ardoino has previously claimed that the company is the "best friend of the US government", as it holds a larger amount of US securities than Germany and many other financial institutions. However, with increasing pressure from regulatory agencies, the future of USDT in the US market remains uncertain.
