Bank Of America Believe Regulating Stablecoins Will Boost Mass Adoption

Stablecoins are gaining wider popularity and are considered as a systemically important asset with a market value of around $141 billion.

There is urgency for regulation of stablecoins, given their potential to become a viable payments method, Bank of America (BofA) said in a research note published on Tuesday.

According to the bank, institutions are waiting for clear 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.

Mastercard, Signature, Visa and Western Union, all of which are buy-rated stocks in BofA’s research coverage, could see an increase in market value from stablecoin regulation.

According to BofA, oversight is needed for stablecoins, as they are considered a “systemically important asset” with a market value of around $141 billion, and a quarterly transaction volume of over $1 trillion this year.

While the stablecoin market is rapidly growing, stablecoin issuers are not regulated under a sweeping framework and “provide varying levels of transparency into the composition of reserves that back their stablecoins,” the banking giant said in its report.

Treasury report, Report on Stablecoin, earlier this month 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 fast action from the U.S. Congress and the passing of a legislation to integrate stablecoins into the banking system, allowing for federal oversight.

If regulators decide that all stablecoin issuers are required to be insured depositories, this could lead to banks issuing their own stablecoins, the bank added.