At a gathering of central bankers recently in Basel,?Switzerland, Harvard University economist Gita Gopinath presented some unsettling data about stablecoins. Up to three-quarters of Tether¡¯s USDT and Circle Internet Group¡¯s USDC ¡ª the world¡¯s most popular 1:1 dollar clones ¡ª are held in wallets where the users control the cryptographic keys.
When money changes hands, it moves from one such self-custody wallet to another in about half of all transactions. Transfers are visible on the blockchain, but the identities of senders and receivers are not. This offers cash-like anonymity. ¡°Stablecoins are now the predominant form of identified illicit activity,¡± Gopinath said.
The research findings are ¡°frightening,¡± former Bank of France Gov. Francois Villeroy de Galhau said in a panel discussion. For decades, authorities have fought to make money less anonymous by getting rid of high-value paper cash, cracking down on offshore banking secrecy and tracking bank transfers. However, in crypto, the tide is reversing. Anonymous stablecoin holdings are bypassing U.S.-regulated intermediaries like Coinbase and Kraken. When they do hit centralized exchanges, they¡¯re mostly in jurisdictions outside the reach of the Genius Act, the U.S. stablecoin regulation passed a year ago.
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