Stablecoin regulation intensifies market competition, Mastercard announces pilot project involving USDC

In the pilot project announced by Mastercard on Tuesday, Circle's USDC will serve as a bridge between cryptocurrencies in consumers' digital wallets and fiat currencies used to pay merchants. USDC is a crypto stablecoin pegged to the value of $1. The issuer promises that USDC can be redeemed 1-to-1 for U.S. dollars at any time.

In addition to Circle, Evolve Bank & Trust and Paxos Trust Co. are also participating in Mastercard's pilot project. The head of the project at Mastercard said it is in "discussions" with Evolve and Metropolitan Commercial Bank to issue cryptocurrency credit cards.

While it sounds like an extra step, exchanging cryptocurrencies for stablecoins and then stablecoins for dollars can be faster and simpler than going directly from crypto to fiat. For example, some cryptocurrencies don’t have a way to be exchanged directly for dollars on an exchange, but they can be exchanged for USDC. The company said the addition of this medium will help cryptocurrency companies that want to offer Mastercard-branded products to their customers.

Five months after Mastercard said it planned to bring some stablecoins to its network, Tuesday’s announcement was seen as another step toward that ultimate goal.

On Monday, the U.S. President’s Working Group on Financial Markets pledged to publish regulatory recommendations on stablecoins in the coming months after the top federal financial regulator discussed use cases and potential risks.

Competition in stablecoins continues, with Visa announcing that it had conducted a small USDC transaction test earlier this year.

The increasing scrutiny of stablecoins is partly a reflection of their wild growth. Since the beginning of the year, Circle’s total USDC holdings have grown sixfold, from about $4 billion on Jan. 1 to more than $25 billion today, according to Coingecko.

Bitpush previously reported that Tether has not issued any new coins for nearly 7 weeks since May.