Crypto CEOs and lawmakers discuss looming regulations.
A recent Congressional hearing witnessed arguments on Stablecoins and the larger crypto ecosystem.
While the concept of crypto and DeFi is relatively new it has also risen dramatically over last year. Regulators have been slow to keep up with the evolving crypto space. A recent face-off between crypto execs and lawmakers is proof of this.
Here's what went down.
US Senate comments on Stablecoins
A recent Congress hearing on stablecoins saw CEOs of major crypto firms address certain regulatory concerns. Regulators were seeking to hold crypto firms more accountable for protection of consumers & investors, while CEOs argued that too much regulation will stifle a potentially transformative space.
The topic of no KYC/AML checks in crypto was brought up to which the execs showed their compliance. Much of the hearing, however, explored the potential of stablecoins where Alexis Goldstein, a financial regulatory expert, argued how stablecoins are an unreliable payment system.
What is the current state of stablecoins?
Stablecoins have proved to be the fuel in increasing the DeFi ecosystem, and a variety of stablecoins have emerged. The supply has exploded throughout 2021 with an almost 5 fold increase from $30B to $150B. Despite calls for more regulation, stablecoin supplies have been growing.
USDT, which was currently the most dominating stablecoin, has notably reduced its dominance from 75% to 54% in 2021. Meanwhile, USDC has doubled their market share. USDC is now also moving to different blockchains like Avalanche. Decentralized alternatives like DAI & UST are on the rise too.
DAI which is backed by crypto collateral, or UST which is seigniorage based stablecoin with algorithmic peg stability are leading the decentralized stablecoin market. MIM is also an emerging player which has gained a lot in recent times.
Stablecoin yields are more attractive
Many are quick to flock to stabecoins due to their ability to de-risk the crypto market. Stablecoin lending yields significantly more than the traditional channels. For instance, these yields can be twice as much as US junk bonds.
Future scope for growth - How stablecoins should be brought to real life payments?
Despite their popularity, stablecoins mainly remain within the crypto ecosystem. A much wider adoption would be seen if they get directly accepted at vendors just like credit/debit cards payments. In an impressive feat, some payments applications are actually using stablecoins.
Visa Becomes First Major Payments Network to Settle Transactions in USD Coin (USDC)
Earlier this year, Visa announced that it accepted the first settlement payment in USDC from its global crypto wallet partner Crypto.com who tested the new capability with their own Visa-branded cards.
Voyager Digital Launches USDC-Linked Debit Card
Cryptocurrency platform Voyager Digital recently announced the launch of their USDC-linked debit card. The card will enable cardholders to instantly spend their crypto assets seamlessly and automatically convert USDC to fiat currency while transacting.
Should stablecoins be banned or regulated ?
Cryptocurrencies are in an enormous boom period. This shows that its ecosystem is already expanding and reaching a wider adoption with a more decentralised structure as a key part of its appeal. What's needed now is greater regulatory clarity, not an outright ban.
Endnote
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