A recent report by Chainalysis suggests that the United States might be losing regulatory control over the stablecoin market. The study, released on October 23 as part of the Chainalysis North America cryptocurrency report, highlights a growing trend of stablecoin activity through non-U.S.-licensed entities.
Changing Tides in Stablecoin Inflows
Chainalysis found that the majority of stablecoin inflows to the top 50 cryptocurrency services have shifted from U.S.-licensed providers to non-U.S.-licensed entities since spring 2023. Notably, as of June 2023, approximately 55% of stablecoin inflows to these top services were directed to non-U.S.-licensed exchanges.
Share of stablecoin inflows to U.S.-licensed vs. non-U.S.-licensed exchanges between July 2022 and June 2023. Source: Chainalysis
Chainalysis pointed out that while U.S. entities initially played a crucial role in legitimizing and fostering the stablecoin market, an increasing number of cryptocurrency users are engaging in stablecoin-related activities with trading platforms and issuers based abroad. This shift has occurred in part because U.S. lawmakers have yet to enact specific stablecoin regulations, with Congress currently considering related bills such as the Clarity for Payment Stablecoins Act and the Responsible Financial Innovation Act.
North America’s Dominance in the Crypto Market
Despite the diminishing licensed stablecoin activity in the United States, North America has solidified its position as the world’s largest cryptocurrency market. From July 2022 to June 2023, the region received an estimated $1.2 trillion in transactions, constituting 24.4% of the global transaction volume during that period. This growth surpasses the combined transaction volume of Central, Northern, and Western Europe, which received an estimated $1 trillion.
The report underscores the changing landscape of the stablecoin market and raises questions about the future regulatory framework for digital assets, particularly in the United States. As the global cryptocurrency market continues to evolve, regulatory adaptability will be key to maintaining oversight and ensuring the stability and security of stablecoin transactions.