Stablecoins have become very popular lately. Their combined supply reached an all-time high of around $10.4 billion on 12 May, with the day being the first time that the total market cap of all stablecoins exceeded the $10 billion mark. Additionally, when compared to crypto-assets, institutions prefer stablecoins as they are pegged to real-world assets like the US Dollar or the Euro. In the case of most exchange-listed stablecoins today, however, they are pegged to the U.S dollar.
So, what are requirements for stablecoin support as these exchange-listed stablecoins trade across five-six major assets including Tether, USDC, and other synthetic dollars, especially on different blockchains? What complexities are faced by such transactions in terms of different tax implications, volatility concerns, and more?
Fireblocks CEO Michael Shaulov in a recent podcast addressed these issues, while also sharing his thoughts on institutional adoption and stablecoin disruption. Noting that stablecoins will be the biggest invention in the coming years, he commented,
“Out of the $7 billion asset-transfer in the last 30 days, $1.8 billion was of stablecoins. USDT- 70%, USDC – 20%, and the rest included about 10%. Stablecoins are extremely important for crypto exchanges because this is where we see the plumming. Stablecoins make a mature market.”
Shaulov also went on to note that credit card providers are actively looking to get involved in the space because once Libra or any other private stablecoin picks up, it would take away the business of credit card and other payment providers. Thus, it can be gathered that Facebook’s stablecoin indeed poses a threat to traditional markets.
Many had speculated way back in 2018 that the coming years would see the advent of second-generation branded stablecoin projects that would include secondary market liquidity, loyalty program integration, and branding opportunities. In fact, with the entry of Facebook’s Libra, it will not be a surprise if brands like Amazon also come out with their own stablecoins. There’s another interesting discussion here. What will happen to dollar-backed stablecoins following the entry of private stablecoins?
Some argue that in light of Facebook’s reach, Libra has the potential to wipe out all other stablecoins. The main purpose behind a stablecoin is to reduce volatility, unlike other cryptocurrencies. So, what difference does Libra make?
Well, the large institutional support that Libra will have from its partnered companies will make it stronger and popular than any other stablecoin. It will make way for widescale adoption. Interestingly, since Asia has seen an explosion in stablecoin trading activity lately, it might end up being a hub for private stablecoins when they come into existence.
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