'Policy Formation Will Be Critical': Experts Weigh In On Stablecoin Adoption

At the recent Benzinga Future of Digital Assets event, industry leaders tackled how stablecoins are reshaping finance, spurring adoption among institutional investors, and addressing operational hurdles in digital markets. The panel, moderated by BlackRock's Kyle Braden, featured Jennifer O'Rourke of DTCC Digital Assets, Chuck Mounts of S&P Global Ratings, and David Alderman of Franklin Templeton, who provided valuable perspectives.

Stablecoins: A Bridge To Institutional Participation

Mounts described stablecoins as a critical link between traditional finance and the digital asset ecosystem.

"Stablecoins are… positioned to be the accelerant to the mass adoption for tradfi firms and crypto financial capabilities in the marketplace," he explained. Mounts shared how S&P Global's stablecoin stability assessment tool is helping institutions evaluate the risk of stablecoins losing their peg to fiat currencies, adding a layer of confidence for new entrants to the market.

Mounts emphasized the need for stablecoins to underpin the tokenization of real-world assets, citing the potential for increased liquidity and operational efficiency. "Policy formation is the single most important non-technology catalyst," he added, predicting that stablecoin legislation could be the first crypto-related law passed by the new Congress.

Overcoming Liquidity And Settlement Challenges

O'Rourke highlighted the practical challenges tied to stablecoin adoption, particularly regarding liquidity pools and settlement speed. She explained that tokenized assets offer fast and programmable transactions, but the supporting payment systems often lag.

"If you're going to buy a tokenized asset… you need to be able to pay for it as quickly as you want to receive it," O'Rourke stated. Addressing this disparity, she argued, is essential for widespread adoption.

O'Rourke also touched on the fragmented nature of liquidity in digital markets, where isolated pools make seamless transactions difficult. She stressed the importance of standardizing processes to connect these pools, paving the way for a more cohesive digital marketplace.

Regulatory Clarity On The Horizon

Alderman of Franklin Templeton pointed to recent shifts in U.S. regulation as promising for stablecoins and digital assets. "I think a lot of crypto companies that were thinking about leaving the U.S. will stay, just because now it's a more pro-crypto stance," he said.

Alderman added that regulatory clarity would encourage companies to invest in new technologies and infrastructure, further supporting the adoption of stablecoins.

Mounts agreed, describing the potential for stablecoin legislation to reduce uncertainty and enable financial institutions to participate more actively in the market. He also noted that stablecoins could play a role in dollarizing foreign economies, citing their use in markets like Argentina as an example.

Building A Path Forward

As the discussion wrapped up, panelists agreed that while stablecoins present challenges, their potential to transform finance is undeniable. The ongoing work to address operational hurdles and regulatory ambiguity will lay the groundwork for broader adoption, making stablecoins a cornerstone of future financial systems.

From their use in tokenizing real-world assets to their potential impact on global markets, stablecoins are proving to be a driving force in bringing digital assets into the institutional fold.

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