Indicators show positive dynamics despite regulatory pressure.
The supply of stablecoins in the digital asset market will grow by 388% in 2021. This is the conclusion reached by analysts of The Block.
At the beginning of the year, the aggregate supply volume of stablecoins on the market was at the level of $29 billion. By the end of December, the figure was $150 billion. Analysts explain the positive dynamics with increasing market interest of participants in the crypto derivatives and DeFi segment instruments.
Tether (USDT) has remained the most-capitalized stablecoin for several years. By the end of 2021, it accounted for more than $80 billion of the total stable supply of the cryptocurrency market. USD Coin (USDC) is in second place in terms of capitalization. The top 5 stablecoins also include Binance USD (BUSD), Dai (DAI) and Pax Dollar (USDP).
What is 2021 for the stablecoin market
In early December, Tether, by decision of Myanmar’s alternative government, became the country’s official currency. Stablecoins, according to local regulators, will simplify calculations.
For USD Coin users, 2021 will be remembered for the fact that the stablecoin issuer – Circle – is under investigation. It was initiated by the US Securities and Exchange Commission (SEC) team. What exactly is the reason for the process is not known.
Earlier, information appeared on the network that the United States was preparing to transfer the power to control the stablecoin market to the SEC. Such changes could negatively affect the prospects for the development of a “stable” cryptocurrency. The fact is that the current head of the SEC, Gary Gensler, has a very negative attitude towards stablecoins. In an interview with the Washington Post, he compared the asset to poker chips.
In 2021, the stablecoin market is also facing pressure from other regulators. One of the problems with “stable” cryptocurrencies, according to regulatory authorities, is the lack of evidence of asset collateral. Flooding the market with stablecoins, according to Yale University economist Gary Gorton and representative of the US Federal Reserve System Jeffrey Zhang, could return the United States to an era of “wild banking”. This term refers to the period when the market is flooded with unsecured bank money.
By the end of 2021, regulators had raised a lot of questions for stablecoin issuers. In particular, the developer of the most capitalized “stable” cryptocurrency, Tether, is under pressure. Despite the fact that company representatives periodically disclose information about the USDT guarantee, market participants still have questions for issuers.
For example, in May 2021, the Tether team revealed that 75.85% stablecoins are backed by cash and cash equivalents. Commercial securities are an important part of the reserve. The project representative did not specify which.
Despite a number of negative opinions about the impact of stablecoins on the market, the US Fed believes that the instrument can become a useful part of the financial system.