Bitcoin Takes Backseat to Surging Stablecoin Status
(15 December 2021 – United States) The focus of regulatory and financial technology (Fintech) funding has firmly switched away from volatile Bitcoin markets to Stablecoins, a rapidly burgeoning space in the realm of cryptocurrency innovation.
In the last week Visa launched a crypto advisory service and asserted that Stablecoins may become a preferred medium of exchange over cryptocurrencies while Meta Platforms launched a Stablecoin payments wallet.
Stablecoins are a form a virtual currency with values pegged to traditional assets such as the US Dollar (USD) or commodities. Their rise has accelerated discussion by major global central banks regarding digital versions of their currencies such as the eAUD (electronic Australian Dollar) and eYuan.
Delphi Digital reports that Stablecoins have recorded significant growth to end the year with the market capitalisation of the top five Stablecoins expanding to almost US$150 billion from US$129 billion year-on-year. The largest stablecoin “Tether” hold a market value of US$76 billion.
The central banks of France and Switzerland announced Europe's first central bank digital currency (CBDC) derived cross border payments execution, after testing project “Jura” in a reference to the mountains that separates the two countries.
Even as senior cryptocurrency company decision makers from Coinbase and Circle strongly advocated Congress to provide more transparent fit-for-purpose rules for the sector, Treasury Secretary Janet Yellen and major bank CEOs pushed back citing the need for firmer regulatory settings for Stablecoins. With Bitcoin capped at US$50,000 for since its flash crash on 4 December, the market capitalisation of the 15,541 coins on the CoinMarketCap platform was US$2.25 trillion compared to US$2.6 trillion at the start of the month.
"I feel like there would be headwinds, but as always with crypto the only thing you can have is an open mind. Cryptocurrencies have benefited from easier cash conditions even in a higher inflation environment, but it is difficult to say what will happen as the Federal Reserve accelerates monetary tightening or gets ready to lift rates” commented Pepperstone Head of Research, Chris Weston.