Stablecoins have been touted as one of the biggest beneficiaries of the demise of Silvergate and Signature. These two banks are the most crypto-friendly and forward-thinking of public banking institutions in the United States, and they not only offer business bank accounts, but also have payment channels – namely the Silvergate Exchange Network and the Signet platform – that allow customers’ funds to flow into encrypted assets. Liquidity on U.S. exchanges was already affected on Monday, a day after New York state regulators closed Signature. Gemini is down 74% this month, while Coinbase’s liquidity is down 50% and Binance.US’ is down 29%, according to data from crypto analytics firm Kaiko. In contrast, Binance’s main global exchange was less affected, down 13%. Stablecoins offer another “gateway” into the world of crypto assets, and their existence was a consolation after Silvergate’s collapse, when there was speculation that Signature might be next. But over the weekend, USDC’s peg to the U.S. dollar fell to as low as 86 cents, leading some to wonder just how “stable” the crypto assets really are. “Stablecoins are likely to become more common among traders,” Kaiko said in a recent report. “Instead of depositing dollars on an exchange, you can deposit dollars on a stablecoin issuer, receive the stablecoin, and then transfer it to the exchange. But the problem is, the stablecoin issuer still needs access to a crypto bank, so the risk is now further Centralization.” While it may be difficult for crypto companies to establish banking relationships for several months, and regulatory uncertainty surrounding cryptocurrencies remains, current market conditions may mean that regulation of stablecoins could soon become clearer . Kristin Smith, executive director of the Blockchain Association, said she could see concrete legislation coming this year, though whether it will make it all the way to the president’s desk is an open question. “Stablecoin regulation has been the subject of congressional hearings and joint regulator studies more than any other crypto issue,” Smith said. “Stablecoin policy is ripe for action.” Last December, crypto industry ally and then-U.S. Senator Pat Toomey proposed the Stablecoin Trust Act. The legislation — the Pennsylvania Republican’s second effort that year — would require stablecoins to be fully backed by reserves. “Some of the bills that are being considered will give consumers confidence in using these stablecoins because they have transparency about what’s going on in reserves,” she said. It’s “governed on a voluntary basis today, but that would make it more uniform , and will also provide guidance on where and how these reserves will be stored.” “That should be the first thing to address,” Smith said. “The political calculation is correct, it’s bipartisan, and the right amount of debate and discussion has been done.” Removing risk from the banking system Some stablecoins may provide an on-ramp into cryptocurrencies, but they won’t replace bank accounts. Over the weekend, Circle, the issuer of USDC, revealed that it held $3.3 billion in reserves at the now-defunct Silicon Valley Bank, sparking panic that the asset is no longer fully backed. By Monday, when banking hours resumed, USDC had re-pegged to $1. “The issues we had over the weekend with stablecoin decoupling had nothing to do with the crypto networks they streamed on,” Smith said. Back to demand for new stablecoins that rely on banking networks.” “With SEN and Signet shut down, doing so has become more difficult. There is still a need to store these reserves in ‘real world’ financial institutions.” As of Monday, Circle Said it has about $9.7 billion in cash, of which $5.4 billion is deposited with BNY Mellon. Another $1 billion in USDC reserves is held by Customers Bank. Some cryptocurrency figures point out that while Silvergate and Signature are the largest cryptocurrency banks, they are not the only ones. Still, given regulators’ hostile attitude towards cryptocurrencies, small banks may be reluctant to do business with cryptocurrency companies in the coming months, especially as the current financial industry turmoil continues. As for the big banks, some may only be willing to take this risk in established companies. For example, Coinbase and Gemini are both clients of JPMorgan Chase. “I would like to see a network emerge on the bank side to provide a faster and more accessible way to engage with the part of the stablecoin ecosystem with banks so that if there is a long weekend, you can still issue or redeem while the banks are closed. back to stablecoins,” Smith said.