Maris Research

What Happens if All Stablecoin Users Have to Be Identified?

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Imagine the following scenario: Sometime in 2021, financial regulators declare that all stablecoin owners must be verified. What would happen to the cryptocurrency ecosystem?

Right now, a large chunk of stablecoin usage is pseudonymous. That is, you or I can hold $20,000 worth of tether or USD coin stablecoins in an unhosted wallet (i.e., not on an exchange) without having to provide our identities to either Tether or Circle, the managers of these stablecoin platforms. We can send this $20,000 along to other users, who can transfer the coins on, who in turn can transfer them on, and no one along this chain needs to unveil themselves.

J.P. Koning, a CoinDesk columnist, worked as an equity researcher at a Canadian brokerage firm and a financial writer at a large Canadian bank. He runs the popular Moneyness blog.

The only point at which stablecoin users have to submit to a Tether or Circle know-your-customer (KYC) process is to redeem stablecoins directly for traditional bank dollars. Or vice versa, to deposit dollars with Tether or Circle and get freshly minted stablecoins.

In a world where traditional non-blockchain based financial institutions like PayPal,

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