Stablecoins Available for Use: Worldwide Volume and Worth

Contents:

• Regulation trends
• How do companies introduce stablecoins?
• Innovations and interesting projects on the stablecoin market
• Arguments around stablecoins

Stablecoins Available For Use: Worldwide Volume and Worth

According to CoinMarketCap, the general market capitalization of all stablecoins in mid-April 2021 has raised to $84.5 billion. An aggregate of $245 billion worth of stablecoins were exchanged each day.

Regulation Trends

EU lawmakers have been worried about tax evasion with cryptographic money and endeavor to control stablecoins in a lawful manner. For example, several countries have proposed to introduce lawful standards that would regulate the emission and turnover of stablecoins across Europe.

Accordingly, the EU Commission prepared a draft of the directive called “Guideline OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on Markets in Crypto-resources”. The document will manage the emission and turnover of all stablecoins with a market capitalization exceeding 1 million euro. It will cover White Paper creation, KYC for stablecoin purchasers and payments between cryptocurrency companies.

In the interim, the UK Treasury asked cryptocurrency companies and research institutes to express their viewpoint on the matters of stablecoin regulation.The Treasury recommends applying similar standards to stablecoin transactions as to customary fiat payments.

In the US, controllers have given a few clarifications concerning stablecoin use. US banks are currently permitted to offer services to stablecoin issuers if the fiat funds backing them up are stored on third-party hosted wallets. The SEC additionally clarified that it would regard algorithmic stablecoins as securities, which involves additional restrictions.

In Asia, stablecoins are expected to facilitate trading between China, Japan, and Korea. In May 2020, Neil Shen (partner of Sequoia Capital) offered a program for stablecoin development on the territory of Hong Kong and the entire Asia. It  highlighted the following measures:

• Making a stablecoin supported by four fiat monetary standards: CNY, HKD, KRW, and JPY
• Making a fiat reserve to guarantee secure activity of the custodial wallets holding the new stablecoin
• Putting People’s Bank of China in charge of the program
• Creating legitimate standards for stablecoin turnover
• The beta-version of stablecoin could be tested in International transactions between China and Hong Kong

In the previous three years, the specialists of Hong Kong presented a few guidelines for cryptographic forms of money and blockchain, and began licensing crypto organizations in November 2019.

However, the ambitious plans mentioned in Neil Shen’s proposition stayed on paper. The Chinese government took their own course. In December 2020, China released $3 million worth of digital yuan, and JD.com turned into the first e-store to accept payments in this stablecoin.

UAE has likewise been dealing with new digital money guidelines. Presently, crypto-companies need to obtain a license of a multilateral exchanging office. Additionally, the issuer should demonstrate that its stablecoins are backed up by fiat reserves at a 1:1 proportion.

Generally, governmental policies around the world are aimed at establishing a strict control over stablecoin circulation. It is said to prevent money laundering operations via cryptocurrencies.

How Do Companies Introduce Stablecoins?

In the previous two years, banks and fintech organizations have considered releasing their own stablecoins or joining forces with existing stablecoin projects. Not many of these plans have yielded any significant outcomes yet. However, first steps in this direction are being made.

1. In December 2020, Visa reported collaboration with Circle. The organization will permit the holders of corporate Circle cards to spend USDC at any place where Visa is acknowledged
2. In February 2019, JP Morgan announced development of the JPM Coin stablecoin, which they planned to test along with a few institutional partners.

A few more companies have been working on leveraging the stablecoin technology: 

• Mitsubishi wanted to dispatch a stablecoin with the ticker MUFG in late 2020. MUFG is pegged to the Japanese yen and was intended to be utilized for shopping.
• IBM plans to emit stablecoins for different organizations on its Blockchain World Wire (BWW) platform for International B2B payments. It is already supported by Philippine RCBC, Brazilian Banco Bradesco, and South Korean Bank of Busan.
• The Russian Sberbank plans to emit Sbercoin, a rouble-pegged stablecoin. In January 2021, the Central Bank of Russia accepted Sberbank’s solicitation to enlist the blockchain platform.
• GMO Internet (Japan) has a blockchain platform and intends to produce a yen-fixed stablecoin in 2020. Plans are delayed, but not canceled.
• In the meantime, Facebook’s Libra project, which couldn’t be launched in the US due to resistance from the SEC, has been moved to Switzerland. The stablecoin was renamed into Diem, and now its launch is planned for Q2 2021.

Innovations and Interesting Projects on the Stablecoin Market

• Terra, a Korean startup, is working on an online business payment framework that covers a bunch of stablecoins pegged to various fiat currencies and balanced utilizing Luna cryptocurrency. As of April 2021, Terra had more than 2 million clients, and its stablecoins were accepted by 76 online stores connected to the CHAI wallet.
• Multis offers a B2B crypto network for fast and easy business payments. It allows corporae customers to connect several wallets, store both crypto and fiat and send international payments.
• Liechtenstein-based Frick bank was quick to offer Stablecoins-as-a-Service, or ScaaS. It allows customers to emit their own fiat-pegged stablecoins that totally comply with PSD2 and other EU standards.
• PegNet is the first decentralized platform enabling stablecoin exchange for a small $0.10 fee. PegNet is compatible with different blockchains and allows users to trade fiat, cryptocurrency and even valuable metals.
• In September 2020, Circle reported collaboration with Dapper Labs, the studio behind CryptoKitties. Circle intends to incorporate its USDC stablecoin into the new Flow Dapper Labs organization. It can be used to pay with crypto in dApps and send international payments in USDC.
• ZeFi plans to offer deposits in USD-pegged stablecoins that will yield an APY of 7%. The stored assets will be made accessible to borrowers at a collateralization rate of more than 150%.

Arguments Around Stablecoins

Basis

Back in spring 2018, Basis gathered investments worth over $133 million to launch an algorithmic stablecoin. Before the finish of that very year, the startup’s legal counselors presumed that SEC would regard the stablecoin as a security and put limits on it. In December 2018, Basis had to close down its activities and return all investments.

New York Attorney General catches Tether cheating with fiat reserves

On February 17, 2021, New York Attorney General accused Tether, Bitfinex, and iFinex of having only 74% of USDT reserves backed up by fiat. Tether saved the license but had to comply with several conditions. It paid a $18.5 mil fine and was obliged to disclose all information concerning USDT transactions, as well as bank deposits.

Full version of the research by BDC Consulting is available here:

https://bdc.consulting/insights/cryptocurrency/stablecoins-circulation-global-volume-and-value