The stablecoin industry featuring prominent cryptocurrencies like Tether, and USDT has experienced new market value highs in 2023.
According to the PwC Global Crypto Regulation Report 2023, out of 43 countries analyzed, 25 jurisdictions had stablecoin legislation or regulation in place by the end of the year.
These countries include Austria, The Bahamas, Denmark, Estonia, Finland, France, Germany, Greece, Japan, Luxembourg, Portugal, Spain, Sweden, Switzerland, and others.
According to data from CoinMarketCap, the total market capitalization of stablecoins reached over $300 billion by the end of the year, accounting for more than 10% of the entire crypto market.
Along with the benefits these stablecoins offer to the economy of a state, there are also some concerns with challenges and risks for regulators, such as potential threats to monetary sovereignty, financial stability, consumer protection, and anti-money laundering (AML) compliance.
The report also found that the vast majority of countries that enacted stablecoin laws have also secured or enforced all the other reviewed regulations, including a crypto regulatory framework, licensing or registration, and the Financial Action Task Force’s (FATF) Travel Rule.
For instance, The Bahamas. was the first country to launch a central bank digital currency (CBDC), called the Sand Dollar, in 2020.
The country also introduced the Payment Systems Act 2020, which provides a comprehensive framework for regulating payment service providers, including stablecoin issuers and operators.
While 25 countries have already regulated stablecoins in 2023, there are still many countries that have not yet finalized their legislation or are in the process of developing it.
Some of the major countries that fall into this category include the United States, the United Kingdom, Canada, Australia, Singapore, and the United Arab Emirates.
There are many reasons for this, some of which center around the fact that the lack of a clear and consistent definition and classification of stablecoins across different jurisdictions fuels these conflicts.
But, the complexity and diversity of stablecoin models and mechanisms, could also pose different risks and require different regulatory responses.