If cryptocurrencies are hitting hard among investors, despite the decline and volatility that bitcoin is registering in recent weeks, the truth is that we are also facing the so-called “stablecoin boom”.
These stablecoins are crypto assets backed by an underlying asset to provide a stable digital payments system. Among the most popular we find the famous Tether (USDT), USD Coin (USDC) and Binance USD (BUSD).
The collateral for these stablecoins, as reported by Ben Laidler, global markets strategist at multi-asset investment platform eToro, is typically under the umbrella of a fiat currency such as the dollar (as the greenback was once pegged to gold). ), but also with other crypto assets (see DAI), or even algorithmically (see TerraUSD), as they aim for transparency, decentralization and speed, but without the volatility.
“The adoption of these vehicles is increasing and we see them as complementary to the eventual central bank digital currencies (CBDC),” he points out.
But the boom is so evident that, as we can see in the following graph, the general use of stablecoins increased with a general market capitalization that reached 115,000 million, despite the correction of the crypto environment, since They maintained their value of $ 1 and are now 3 of the largest crypto assets.
“Its usefulness is growing, due to the facilitation of the crypto-asset trade and the enablement of the development of DeFi, even through the integration of cross-border trade and remittances. These differ from the CBDCs, which will have a direct claim on the central bank, but probably with a limited size, compared to the emissions generated in the private sector ”, explains the understanding of eToro.
In terms of regulation, one of the key points when we talk about crypto assets, Laidler believes that regulators focus on the fight against money laundering and financial stability. “They expect the US $ 65 billion money market fund, Reserve Primary, to ‘break the ball’ in the global financial crisis, as 56% of monetary assets (paper money) are under threat. This forced liquidation and government intervention to support the $ 3.3 trillion money market industry, ”he clarifies.
The controversy of Tether and its alternatives
But if there is a controversy with stablecoins, it is with their leader in this market, Tether, which is only backed in a fractional way with 50% guaranteed by paper money and the rest in other low-risk assets, but not without risk. For the eToro expert, this has generated alternatives such as USD Coin (USDC) with more guarantees and transparency, and also regulatory interest.