As a seasoned analyst with over two decades of experience in the financial sector, I find myself intrigued by the burgeoning world of stablecoins. While they are undeniably gaining traction, it is clear that they still have a long way to go before they become mainstream players in global commerce transactions.
According to a recent report, while stablecoins are becoming more popular, they currently account for just a tiny percentage of global online transactions. Moreover, there aren’t enough stablecoins tied to currencies other than the U.S. Dollar as per the findings in the report published on November 27.
According to a report compiled by strategy consultancy Quinlan & Associates and blockchain developer IDA, cryptocurrencies such as stablecoins make up only 0.2% of the total value of e-commerce transactions worldwide.
Lawrence Chu, the CEO and co-founder of IDA, pointed out in a statement that due to its integration with blockchain technology, stablecoins provide several advantages such as programmability, cost savings, increased transparency, continuous accessibility around the clock, and faster transaction processing. These benefits are beyond the capabilities of conventional financial systems,” is one way to paraphrase the original sentence in natural and easy-to-read language.
As an analyst, I find that the widespread use of this promising stablecoin is primarily confined to the Web3 environment at present. This is largely due to the ongoing uncertainty surrounding regulation and the relatively scarce availability of non-USD stablecoin alternatives, which pose significant obstacles.
The main reason for this hesitancy stems from regulatory ambiguity, as indicated by the fact that 81% of merchants list it as the major hurdle to incorporating digital assets such as stablecoins as common payment methods, according to Benjamin Quinlan, CEO of Quinlan.
Furthermore, the report emphasizes that since about 83% of countries globally do not rely on the USD as their primary or secondary currency, and approximately 40% of international transactions occur in currencies other than the USD, there is a significant demand for stablecoins that are pegged to non-USD currencies.
The combined value of various stablecoins amounts to approximately $200 billion, with almost the entire sum being associated with stablecoins tied to the U.S. dollar, as per statistics from CoinMarketCap.
The two most widely used stablecoins, USDT (Tether) and USDC (USD Coin), have approximately $130 billion and $40 billion in total value as suggested by current market data, respectively.
IDA is set to introduce a digital currency tied to the Hong Kong Dollar (HKD), aimed at facilitating transactions between Hong Kong and international markets, as stated by both IDA and Quinlan.
It appears that the popularity of stablecoins could be boosting interest in short-term U.S. Treasury securities, particularly Treasury bills, as suggested by data from the U.S. Department of the Treasury.
Since the majority of stablecoin collateral appears to be Treasury bills or Treasury-backed repurchase agreements, it’s reasonable to assume that the expansion of stablecoins might have led to a slight rise in the demand for short-term U.S. Treasury bonds, as suggested by minutes from a Treasury Department meeting published on Oct 29th.
According to former U.S. Senator Pat Toomey, it’s expected that legislators will start working on regulating stablecoins from the year 2025 onwards, as reported to CryptoMoon.
According to Toomey, it’s crucial to address some lingering doubts about the issuers of stablecoins before moving forward. These concerns involve determining necessary reserves, ensuring deposit insurance in banks, and establishing clear regulatory oversight.
During the forthcoming term of Congress, several significant bills related to cryptocurrency are set to be reviewed, including Senator Bill Hagerty’s proposal known as the “Clarity for Payment Stablecoins Act.
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2024-11-27 20:57