(Reuters) -The total market capitalization of stablecoins surged to a record high on Wednesday, data showed, as the U.S. Senate passed a bill to regulate the sector, a major step towards legitimising a once-niche but now fast-growing corner of the crypto market.

According to CoinDesk data, the market capitalization of stablecoins hit an all-time high of $251.7 billion, up 22% so far this year.

Stablecoins are a type of cryptocurrency designed to maintain a constant value, usually via a 1:1 peg with the U.S. dollar. They are commonly used by crypto traders to move funds between tokens.

Their use has soared in recent years, and analysts expect the market to grow further once the U.S. legislation has passed.

Proponents say stablecoins could be used to send payments instantly, while others worry they will lead to closer ties between the crypto world and traditional financial markets.

If the U.S. bill is eventually signed into law, stablecoins would be required to be backed by liquid assets such as U.S. dollars and short-term Treasury bills, and for issuers to publicly disclose the composition of their reserves on a monthly basis.