The growing adoption of stablecoins keeps increasing worldwide as countries prepare the ground to launch their own versions of central bank digital currencies or CBDCs. The most talked about stablecoin
Stablecoin
Unlike other cryptocurrencies like Bitcoin and Ethereum, stablecoins are cryptocurrencies that have been designed to keep a stable value. Placing a greater emphasis on stability over volatility can be a huge draw for some investors. Many individuals can be turned off from large swings and uncertainty presented by cryptos relative to other traditional assets.Stablecoins control for this volatility by being pegged to another cryptocurrency, fiat money, or to exchange-traded commodities, including gold, silver, or others. Advantages of StablecoinsOf note, stablecoins redeemable in currency, commodities, or fiat money are also said to be backed, whereas those tied to an algorithm are not considered to be so.There are several advantages of asset backed crypto. First, these coins are stabilized by assets that fluctuate outside of the crypto space, that is. This can help mitigate the financial risk associated with these assets.For example, Bitcoin and altcoins are highly correlated, so that cryptocurrency holders cannot escape periodic price falls. Stablecoins control for this vulnerability, allowing for the diversification of risk in a portfolio.Stablecoins also possess a mechanism for redeeming the asset backing them. This grants an additional level of confidence associated with the coin and are unlikely to drop below the value of the underlying physical asset, due to the effects such as arbitrage.For example, fiat-pegged coins are coins that are tied to a specified amount of fiat currency, usually on a one-to-one ratio (i.e.1 StablecoinX = $1). The companies that issue these currencies must have fiat reserves in the equivalent amount of the stablecoins they have issued.Crypto-pegged stablecoins constitute coins that are tied to a specified amount of another cryptocurrency, such as Bitcoin or Ethereum. Algorithmic stablecoins use supply-and-demand to automatically maintain a stable value.
Unlike other cryptocurrencies like Bitcoin and Ethereum, stablecoins are cryptocurrencies that have been designed to keep a stable value. Placing a greater emphasis on stability over volatility can be a huge draw for some investors. Many individuals can be turned off from large swings and uncertainty presented by cryptos relative to other traditional assets.Stablecoins control for this volatility by being pegged to another cryptocurrency, fiat money, or to exchange-traded commodities, including gold, silver, or others. Advantages of StablecoinsOf note, stablecoins redeemable in currency, commodities, or fiat money are also said to be backed, whereas those tied to an algorithm are not considered to be so.There are several advantages of asset backed crypto. First, these coins are stabilized by assets that fluctuate outside of the crypto space, that is. This can help mitigate the financial risk associated with these assets.For example, Bitcoin and altcoins are highly correlated, so that cryptocurrency holders cannot escape periodic price falls. Stablecoins control for this vulnerability, allowing for the diversification of risk in a portfolio.Stablecoins also possess a mechanism for redeeming the asset backing them. This grants an additional level of confidence associated with the coin and are unlikely to drop below the value of the underlying physical asset, due to the effects such as arbitrage.For example, fiat-pegged coins are coins that are tied to a specified amount of fiat currency, usually on a one-to-one ratio (i.e.1 StablecoinX = $1). The companies that issue these currencies must have fiat reserves in the equivalent amount of the stablecoins they have issued.Crypto-pegged stablecoins constitute coins that are tied to a specified amount of another cryptocurrency, such as Bitcoin or Ethereum. Algorithmic stablecoins use supply-and-demand to automatically maintain a stable value. Read this Term project nowadays is the digital dollar.
In fact, the Fed’s Chairman, Jerome Powell, recently talked about it and said that developing a digital dollar could help safeguard the US dollar dominance in the world. “A US CBDC (central bank digital currency) could… potentially help maintain the dollar’s international standing,” he said.
Powell added during his speech: “As we consider feedback…we will be thinking not just about the current state of the world, but also how the global financial system might evolve over the next 5 to 10 years.”
Stablecoins Dominance
The digital dollar is still a project, as well as many other CBDCs that are being discussed nowadays. However, the stablecoins market is consolidated across the cryptocurrency sphere, specifically the ones pegged to the US dollar, with Tether (USDT) being the dominant one, with a market capitalization of over $69 billion, followed by USD Coin (USDC), with over $55 billion, according to metrics from CoinMarketCap.
Stablecoins Market Cap – Source: CoinMarketCap
The questions are many when we talk about stablecoins pegged to the greenback: is there a battle of dominance between adopting stablecoins and fiat? Can we talk about the US dollar vs. stablecoins as a sole concept? Or are there other fronts to cover?
Focus of the Discussion
Gabriella Kusz, CEO at Global Digital Asset and Cryptocurrency Association
Speaking with Finance Magnates, Gabriella Kusz, the CEO at Global Digital Asset and Cryptocurrency Association, commented that all depends on what regulations are actually adopted: “If they are balanced and act to advance innovation while protecting consumers (ie, provide transparency around the nature of collateralization, require adequate capital reserves and facilitate ease/access to conversion into and out of fiat) then I believe such regulations will advance the development of stablecoins.”
She pointed out that we should talk about the concept of the Global Digital Economy rather than discussing a battle between stablecoins and US dollar because most of the stablecoins are backed by fiat USD. “Stablecoins when backed by fiat are predominantly backed by the US dollar, so the concept or argument of stablecoins versus the US is a bit of a moot point. By virtue of the fact that most fiat backed stable coins are carrying the US dollar with them they actually work to advance and extend the prominence of the US dollar in the Global Digital economy,” Kusz added.
Neil Bergquist, CEO and Co-Founder at Coinme
Neil Bergquist, the CEO and Co-Founder at Coinme, told Finance Magnates that he agrees with the fact that there should not be a battle between the US dollar and US dollar-backed stablecoins because dollar blacked stablecoins are supposed to be a 1:1 representation of USD. “As USD stablecoin adoption grows, so does the adoption of USD. The unique benefit of stablecoins is that they’re on a blockchain which enables a digitally native financial experience. For example, with stablecoins, people can move dollars the way we send and receive email,” he commented.
Also, he talked about regulations in the stablecoin sphere: “A regulatory framework for stablecoins would encourage additional stablecoin adoption and investment in stablecoin infrastructure. In addition, I would assume stablecoin-specific regulation would attempt to protect customers by ensuring stablecoins are, in fact, backed by dollars 1:1, could remain pegged to the dollar during times of high volatility, and ensure proper AML controls are in place.”
Both experts agreed that the focus of the discussion should be aligned on what the regulation
Regulation
Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority (FCA), the US’ Securities and Exchange Commission (SEC), Australian Security and Investment Commission (ASIC), and the Cyprus Securities and Exchange Commission (CySEC) are the most widely dealt with authorities in the FX industry.In its most basic sense, regulators help ensure the filing of reports and transmission of data to help police and monitor activity by brokers. Regulators also serve as a countermeasure against market abuse and malpractice by brokers. Brokers adhering to a list of mandated rules are authorized to provide investment activities in a given jurisdiction. By extension, many unauthorized or unregulated entities will also seek to market their services illegally or function as a clone of a regulated operation.Regulators are essential in snuffing out these scam operations as they prevent significant risks for investors.In terms of reporting, brokers are also required to regularly file reports about their clients’ positions to the relevant regulatory authorities. The most-recent regulatory push in the aftermath of the Great Financial Crisis of 2008 has delivered a material shift in the regulatory reporting landscape.Brokers typically outsource the reporting to other companies which are connecting the trade repositories used by regulators to the broker’s systems and are handling this crucial element of compliance.Beyond FX, regulators help reconcile all matters of oversight and are watchdogs for each industry. With ever-changing information and protocols, regulators are always working to promote fairer and more transparent business practices from brokers or exchanges.
Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority (FCA), the US’ Securities and Exchange Commission (SEC), Australian Security and Investment Commission (ASIC), and the Cyprus Securities and Exchange Commission (CySEC) are the most widely dealt with authorities in the FX industry.In its most basic sense, regulators help ensure the filing of reports and transmission of data to help police and monitor activity by brokers. Regulators also serve as a countermeasure against market abuse and malpractice by brokers. Brokers adhering to a list of mandated rules are authorized to provide investment activities in a given jurisdiction. By extension, many unauthorized or unregulated entities will also seek to market their services illegally or function as a clone of a regulated operation.Regulators are essential in snuffing out these scam operations as they prevent significant risks for investors.In terms of reporting, brokers are also required to regularly file reports about their clients’ positions to the relevant regulatory authorities. The most-recent regulatory push in the aftermath of the Great Financial Crisis of 2008 has delivered a material shift in the regulatory reporting landscape.Brokers typically outsource the reporting to other companies which are connecting the trade repositories used by regulators to the broker’s systems and are handling this crucial element of compliance.Beyond FX, regulators help reconcile all matters of oversight and are watchdogs for each industry. With ever-changing information and protocols, regulators are always working to promote fairer and more transparent business practices from brokers or exchanges. Read this Term should stand by nowadays, rather than putting a battle between stablecoins and the fiat.
The growing adoption of stablecoins keeps increasing worldwide as countries prepare the ground to launch their own versions of central bank digital currencies or CBDCs. The most talked about stablecoin
Stablecoin
Unlike other cryptocurrencies like Bitcoin and Ethereum, stablecoins are cryptocurrencies that have been designed to keep a stable value. Placing a greater emphasis on stability over volatility can be a huge draw for some investors. Many individuals can be turned off from large swings and uncertainty presented by cryptos relative to other traditional assets.Stablecoins control for this volatility by being pegged to another cryptocurrency, fiat money, or to exchange-traded commodities, including gold, silver, or others. Advantages of StablecoinsOf note, stablecoins redeemable in currency, commodities, or fiat money are also said to be backed, whereas those tied to an algorithm are not considered to be so.There are several advantages of asset backed crypto. First, these coins are stabilized by assets that fluctuate outside of the crypto space, that is. This can help mitigate the financial risk associated with these assets.For example, Bitcoin and altcoins are highly correlated, so that cryptocurrency holders cannot escape periodic price falls. Stablecoins control for this vulnerability, allowing for the diversification of risk in a portfolio.Stablecoins also possess a mechanism for redeeming the asset backing them. This grants an additional level of confidence associated with the coin and are unlikely to drop below the value of the underlying physical asset, due to the effects such as arbitrage.For example, fiat-pegged coins are coins that are tied to a specified amount of fiat currency, usually on a one-to-one ratio (i.e.1 StablecoinX = $1). The companies that issue these currencies must have fiat reserves in the equivalent amount of the stablecoins they have issued.Crypto-pegged stablecoins constitute coins that are tied to a specified amount of another cryptocurrency, such as Bitcoin or Ethereum. Algorithmic stablecoins use supply-and-demand to automatically maintain a stable value.
Unlike other cryptocurrencies like Bitcoin and Ethereum, stablecoins are cryptocurrencies that have been designed to keep a stable value. Placing a greater emphasis on stability over volatility can be a huge draw for some investors. Many individuals can be turned off from large swings and uncertainty presented by cryptos relative to other traditional assets.Stablecoins control for this volatility by being pegged to another cryptocurrency, fiat money, or to exchange-traded commodities, including gold, silver, or others. Advantages of StablecoinsOf note, stablecoins redeemable in currency, commodities, or fiat money are also said to be backed, whereas those tied to an algorithm are not considered to be so.There are several advantages of asset backed crypto. First, these coins are stabilized by assets that fluctuate outside of the crypto space, that is. This can help mitigate the financial risk associated with these assets.For example, Bitcoin and altcoins are highly correlated, so that cryptocurrency holders cannot escape periodic price falls. Stablecoins control for this vulnerability, allowing for the diversification of risk in a portfolio.Stablecoins also possess a mechanism for redeeming the asset backing them. This grants an additional level of confidence associated with the coin and are unlikely to drop below the value of the underlying physical asset, due to the effects such as arbitrage.For example, fiat-pegged coins are coins that are tied to a specified amount of fiat currency, usually on a one-to-one ratio (i.e.1 StablecoinX = $1). The companies that issue these currencies must have fiat reserves in the equivalent amount of the stablecoins they have issued.Crypto-pegged stablecoins constitute coins that are tied to a specified amount of another cryptocurrency, such as Bitcoin or Ethereum. Algorithmic stablecoins use supply-and-demand to automatically maintain a stable value. Read this Term project nowadays is the digital dollar.
In fact, the Fed’s Chairman, Jerome Powell, recently talked about it and said that developing a digital dollar could help safeguard the US dollar dominance in the world. “A US CBDC (central bank digital currency) could… potentially help maintain the dollar’s international standing,” he said.
Powell added during his speech: “As we consider feedback…we will be thinking not just about the current state of the world, but also how the global financial system might evolve over the next 5 to 10 years.”
Stablecoins Dominance
The digital dollar is still a project, as well as many other CBDCs that are being discussed nowadays. However, the stablecoins market is consolidated across the cryptocurrency sphere, specifically the ones pegged to the US dollar, with Tether (USDT) being the dominant one, with a market capitalization of over $69 billion, followed by USD Coin (USDC), with over $55 billion, according to metrics from CoinMarketCap.
Stablecoins Market Cap – Source: CoinMarketCap
The questions are many when we talk about stablecoins pegged to the greenback: is there a battle of dominance between adopting stablecoins and fiat? Can we talk about the US dollar vs. stablecoins as a sole concept? Or are there other fronts to cover?
Focus of the Discussion
Gabriella Kusz, CEO at Global Digital Asset and Cryptocurrency Association
Speaking with Finance Magnates, Gabriella Kusz, the CEO at Global Digital Asset and Cryptocurrency Association, commented that all depends on what regulations are actually adopted: “If they are balanced and act to advance innovation while protecting consumers (ie, provide transparency around the nature of collateralization, require adequate capital reserves and facilitate ease/access to conversion into and out of fiat) then I believe such regulations will advance the development of stablecoins.”
She pointed out that we should talk about the concept of the Global Digital Economy rather than discussing a battle between stablecoins and US dollar because most of the stablecoins are backed by fiat USD. “Stablecoins when backed by fiat are predominantly backed by the US dollar, so the concept or argument of stablecoins versus the US is a bit of a moot point. By virtue of the fact that most fiat backed stable coins are carrying the US dollar with them they actually work to advance and extend the prominence of the US dollar in the Global Digital economy,” Kusz added.
Neil Bergquist, CEO and Co-Founder at Coinme
Neil Bergquist, the CEO and Co-Founder at Coinme, told Finance Magnates that he agrees with the fact that there should not be a battle between the US dollar and US dollar-backed stablecoins because dollar blacked stablecoins are supposed to be a 1:1 representation of USD. “As USD stablecoin adoption grows, so does the adoption of USD. The unique benefit of stablecoins is that they’re on a blockchain which enables a digitally native financial experience. For example, with stablecoins, people can move dollars the way we send and receive email,” he commented.
Also, he talked about regulations in the stablecoin sphere: “A regulatory framework for stablecoins would encourage additional stablecoin adoption and investment in stablecoin infrastructure. In addition, I would assume stablecoin-specific regulation would attempt to protect customers by ensuring stablecoins are, in fact, backed by dollars 1:1, could remain pegged to the dollar during times of high volatility, and ensure proper AML controls are in place.”
Both experts agreed that the focus of the discussion should be aligned on what the regulation
Regulation
Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority (FCA), the US’ Securities and Exchange Commission (SEC), Australian Security and Investment Commission (ASIC), and the Cyprus Securities and Exchange Commission (CySEC) are the most widely dealt with authorities in the FX industry.In its most basic sense, regulators help ensure the filing of reports and transmission of data to help police and monitor activity by brokers. Regulators also serve as a countermeasure against market abuse and malpractice by brokers. Brokers adhering to a list of mandated rules are authorized to provide investment activities in a given jurisdiction. By extension, many unauthorized or unregulated entities will also seek to market their services illegally or function as a clone of a regulated operation.Regulators are essential in snuffing out these scam operations as they prevent significant risks for investors.In terms of reporting, brokers are also required to regularly file reports about their clients’ positions to the relevant regulatory authorities. The most-recent regulatory push in the aftermath of the Great Financial Crisis of 2008 has delivered a material shift in the regulatory reporting landscape.Brokers typically outsource the reporting to other companies which are connecting the trade repositories used by regulators to the broker’s systems and are handling this crucial element of compliance.Beyond FX, regulators help reconcile all matters of oversight and are watchdogs for each industry. With ever-changing information and protocols, regulators are always working to promote fairer and more transparent business practices from brokers or exchanges.
Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority (FCA), the US’ Securities and Exchange Commission (SEC), Australian Security and Investment Commission (ASIC), and the Cyprus Securities and Exchange Commission (CySEC) are the most widely dealt with authorities in the FX industry.In its most basic sense, regulators help ensure the filing of reports and transmission of data to help police and monitor activity by brokers. Regulators also serve as a countermeasure against market abuse and malpractice by brokers. Brokers adhering to a list of mandated rules are authorized to provide investment activities in a given jurisdiction. By extension, many unauthorized or unregulated entities will also seek to market their services illegally or function as a clone of a regulated operation.Regulators are essential in snuffing out these scam operations as they prevent significant risks for investors.In terms of reporting, brokers are also required to regularly file reports about their clients’ positions to the relevant regulatory authorities. The most-recent regulatory push in the aftermath of the Great Financial Crisis of 2008 has delivered a material shift in the regulatory reporting landscape.Brokers typically outsource the reporting to other companies which are connecting the trade repositories used by regulators to the broker’s systems and are handling this crucial element of compliance.Beyond FX, regulators help reconcile all matters of oversight and are watchdogs for each industry. With ever-changing information and protocols, regulators are always working to promote fairer and more transparent business practices from brokers or exchanges. Read this Term should stand by nowadays, rather than putting a battle between stablecoins and the fiat.
