- By fulfilling the demand for dollar-pegged stablecoins, the dollar can reclaim its supremacy in the world.
- The US requires a robust regulatory framework for stablecoins.
The Demand for Dollar-pegged Stablecoins in Non-US Markets
In the past week, Jeremy Allaire, CEO of stablecoin issuer Circle, stated that 7% of demand for the stablecoin USDC comes from outside the US. He further says that the demand for secure, robust digital dollars is quickly emerging in developing markets like Asia, Latin America, and Africa.
The largest stablecoin issuer, Tether, states that individuals in countries with a volatile domestic currency employ stablecoins to hedge against inflationary conditions without holding a US-based bank account.
This statement by Allaire comes in view of the US House Financial Services Committee’s proposed bill for the framework for stablecoins. The bill defines the guidelines for issuing stablecoins; however, it witnessed a delay from the previously scheduled date of July 17, 2023, to a new date of July 26, 2023. This caused a little stir in the crypto space.
Tether (USDT) continues to maintain its position as the largest stablecoin in terms of market capitalization. However, following its fiasco with the Silicon Valley Bank (SVB) concerning its reserves, it has reduced its presence in the market.
Currently, the stablecoin market is a duopoly. Paolo Ardoino, CTO of Tether, expressed amusement that a negligible debug of USDT hasn’t benefited the market for USDC.
It is estimated that the market value of the USD Coin stands at $26 Billion. This shows a significant decline from whence the market value was at $45 Billion at the beginning of the year. Moreover, until last year, the market for USDC was worth $55 Billion.
Can Stablecoins Maintain the Dollar’s Influence?
In a recent interview, Brian Brooks, former CEO of Binance US, talked about the emerging demand for dollar-pegged stablecoins. He states that countries that face constant inflation demand dollar-related products in order to keep their money safe. Given this, in many countries where citizens can’t hold a dollar account, stablecoins are the way to go.
In view of this, he suggests that the US can take advantage of this situation by fulfilling the demand and making the dollar relevant again. He further comments that, at a time when governments from all around the world want to restrict the utility of the dollar in the global financial landscape, stablecoins could provide a stronghold for the dollar in the global financial space.
Additionally, he also stated that this opportunity could go in vain if a robust regulatory framework is not established.
How Are Stablecoin Issuers Crucial for the Global Economy?
The endorsers of stablecoin regulators like Brian Brooks, while pointing out the growth of stablecoins in the world economy, argue that they should be subject to the same surveillance as banks.
Tether currently has about $81.8 Billion in digital assets under management, which is almost the same as a small American bank or any major bank in a developing economy. Irrespective of this, only a few banks come close to Tether’s position in the stablecoin market.
According to Blockworks’ data, the USDT constitutes two-thirds of the total supply of stablecoins in the world, growing exponentially in recent months. This result often comes from another stablecoin issuer losing its market share.
