[Bitcoin Now] Growing 'Coin Run Concerns'... US Financial Authorities Tighten Regulatory Reins

US Financial Authorities to Discuss Market Influence and Regulation of Stablecoins
GBTC Lock-up Period Ends... 16,240 Bitcoins Released on the 18th Alone

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Gong Byung-sun] U.S. financial authorities have begun to tighten regulations on the cryptocurrency market. In response to concerns that dollar-pegged stablecoins are in a regulatory blind spot, U.S. financial authorities appear to be taking action.

According to the Wall Street Journal (WSJ) on the 17th (local time), Treasury Secretary Janet Yellen plans to convene the President’s Working Group on Financial Markets (PWG) on the 19th (local time) to discuss the market influence of stablecoins and related regulations. The chairpersons of the Federal Reserve (Fed), Securities and Exchange Commission (SEC), and Commodity Futures Trading Commission (CFTC) are also scheduled to attend the meeting.

Stablecoins, cryptocurrencies pegged to major currencies such as the dollar and euro, exhibit low volatility. As a result, stablecoins are considered to have stable value and are used as collateral in cryptocurrency derivatives markets.

However, concerns have been raised that stablecoins are in a regulatory blind spot, which could lead to investor losses. If a large number of people attempt to withdraw dollars linked to stablecoins simultaneously, it could trigger a payment default similar to a bank run. Currently, stablecoin issuers like Tether are not clearly regulated on how to manage the dollars they hold. In 2019, overseas cryptocurrency exchange Bitfinex used $850 million (approximately 974.9 billion KRW) deposited with Tether to cover customer asset losses, which was concealed at the time.

Meanwhile, the lock-up period for Grayscale’s Bitcoin Investment Trust (GBTC), a U.S. asset management firm, has begun to expire. According to data from overseas cryptocurrency exchange Bybit, about 16,240 bitcoins will be released into the market in a single day on the 18th. This is the largest volume ever based on the amount of expired lock-up period, valued at approximately 610.1 billion KRW.

Experts’ forecasts diverged. Nikolaos Panigirtzoglou, JP Morgan’s investment strategist, predicted that the large volume release would cause Bitcoin to plummet sharply. On the other hand, Mira Christanto, a researcher at cryptocurrency analytics firm Messari, argued, “Grayscale does not have a mechanism to sell Bitcoin, so it will maintain a premium over net asset value,” adding, “The expiration of the lock-up period will not put pressure on the market.”

According to domestic cryptocurrency exchange Upbit, as of 4:11 PM on the 19th, Bitcoin was priced at 37.6 million KRW, down 0.15% from the previous day. It rebounded slightly after falling to 36.82 million KRW on the 17th.