Regulators Build Global Stablecoin Firewall

Regulators around the world are quietly building a global stablecoin firewall to control cross-border transactions. The U.S., UK, and Hong Kong are leading the effort to legitimize and supervise stablecoin payment infrastructure. According to a proposal by the U.S. Treasury, intermediaries and issuers will be required to trace and identify stablecoin transfers.

The Financial Conduct Authority (FCA) in the UK has published final rules on stablecoins, bringing issuance and custody under the Financial Services and Markets Act. However, retail payments will fall under the Payment Services Regulations. The Bank of England and FCA have also outlined a two-tier system to oversee 'systemic' issuers.

In Europe, the European Union's MiCA regulation has already shown its impact on market dynamics. Researchers found that $USDC's market percentage changed by 0.82 standard deviations after the regulation was introduced, while $USDT trading continued to decline where it was barred.

Regulators are focusing on controlling transaction velocity and identifying participants in cross-border transactions. The common thread among these approaches is that stablecoins are evolving from crypto-market instruments into payment infrastructure, requiring closer oversight.