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(Kitco News) - Stablecoins are already providing access to U.S. dollars for many in the developing world and distressed economies, but they could become a regular tool for payments and transactions in the United States in the future, according to Nevin Freeman, co-founder of stablecoin platform Reserve.
“I see stablecoins as really the natural evolution of crypto technology into ordinary commerce and finance,” Freeman said.
Freeman told Kitco News Reporter Ernest Hoffman that while stablecoins are the foundation of the crypto ecosystem, he already sees stablecoins being adopted as a stable alternative currency by people with no interest in crypto per se.
“People for the most part use stablecoins as part of speculative trading activities these days, but we do start to see stablecoins being used more and more for ordinary transactions and savings in economies where access to US dollars is attractive and not necessarily easy to get,” he said.
He said that when he talks to people in the United States about cryptocurrency and stablecoins, nobody is interested in using them as a regular form of payment, but in economies that have undergone hyperinflation or have other limitations such as capital controls, stablecoins represent a way to access U.S. dollars.
“It’s not really the case that we come across a whole lot of people who are especially excited to use crypto as money,” he said. “But we do come across a lot of people who are especially excited to use the US dollar as their currency of choice, and stablecoins often present a novel way to do that. It's really the desire for dollars that is driving the usage of stablecoins in economies that have currency issues.”
Freeman said he also sees the possibility that developed economies could “massively switch to the use of stablecoins” for everyday savings and commerce. “I do think that there is quite a lot of opportunity there as well,” he said. “If you've made an ordinary bank wire any time in the past couple of years, you know that that can sometimes be a big headache, whereas sending a USDC transaction pretty much just always works.”
“I do think that the opportunity for even just U.S. dollar stablecoins in developed economies like the U.S. is really very big, it's just going to take quite a while to get there.”
Freeman said that the potential for tokenization of traditional securities is also enormous, but the financial industry and the broader society will have to move into that future with “open eyes” and think about the risks and challenges it will pose.
“One thing that I do worry about, and I think regulators will worry about, is would it be the case that disaligned states could acquire large shares in key companies in the United States that are important to our national security, and control those companies, if we tokenized everything and got rid of those limitations,” he said. “I think with that particular challenge, a natural solution could be allowing anyone to acquire an economic interest, but to require that token holder to prove their U.S citizenship before they can participate in actually voting those shares in a U.S corporation.”
“There's really a lot of thinking about the implications before we just rush to tokenize everything.”
Freeman also shared his thoughts about the recent draft stablecoin bill which caught the industry by surprise ahead of last week’s Congressional hearing on stablecoins and CBDC development.
“I think it's important to note that in the hearing, many of the members of the committee made it very clear that that bill doesn't really represent something that they're excited to move forward with in its current form,” he said. “When I was reading it I definitely had that in mind, like okay, here are the best ideas we've been able to get down on paper so far, but we should expect this to change quite a lot before actually being thought through and voted on.”
He said he doesn’t envy the job of policymakers who are tasked with developing legislation that addresses complex problems while satisfying different interests and a divided government.
“It's so difficult to think through all of the different considerations and challenges,” he said. “I think that the general thrust of trying to decide who's going to be in charge of allowing someone to become a stablecoin issuer or not in the United States, and how to make sure the assets that back that stablecoin are legitimate, I think that makes a ton of sense.”
Freeman said he’s very pleased to see that the U.S. government is moving towards legitimization of dollar-backed stablecoins rather than outlawing them or requiring that they only be issued by the state.
“I think it's a pretty clear signal to the market that privately-issued U.S. dollar stablecoins are here to stay in the United States.”
To hear Freeman’s views on algorithmic stablecoins and other provisions of the draft bill, watch the above video.
