Since its June 5 trading debut, Circle’s (CRCL) stock has soared over 500%. The rising provider has issued over $61 billion worth of USD Coin (USDC-USD), becoming the world’s second-largest stablecoin issuer in today’s $253 billion market. Circle has applied to establish a national trust bank charter, aiming to integrate stablecoins into traditional banking.
Stablecoins are a type of cryptocurrency designed to mirror the value of another asset, such as the US dollar. They offer price stability, making them a popular payment option for other cryptocurrencies due to easier and quicker online transactions. Analysts predict the total industry stablecoin supply could reach around $4 trillion over the next decade.
There are two types of stablecoins: collateralized and algorithmic. Collateralized stablecoins are backed by reserves, ensuring price stability by holding at least $1 in reserves for each coin issued. Algorithmic stablecoins use an algorithm to control supply and stabilize prices. The majority of the stablecoin market is currently dominated by US dollar-backed stablecoins.
Circle CEO Jeremy Allaire believes the US needs to adapt to the growing digital currency space to ensure the success of digital dollars. Stablecoins, with Tether as the largest by market capitalization, have gained prominence in recent years. Dai, a decentralized stablecoin, uses smart contracts for backing, offering a more decentralized approach to stability.
Stablecoins facilitate easier and quicker online transactions by operating on the blockchain. With transactions resolving in minutes or seconds compared to the hours or days of traditional bank transfers, stablecoins offer a practical alternative for cross-border and microtransactions. The G20 aims to reduce global payment costs and improve the cross-border payment experience, with stablecoins emerging as a consumer-adopted solution. Stablecoins are gaining popularity due to their stability, especially in countries with high inflation like Argentina. Transactions are transparent and secure on the blockchain. Users have full control over their funds and can earn interest through lending. However, risks include collateral management errors. Tether faced legal issues regarding reserves backing the stablecoin. Algorithmic stablecoins like Terra and Luna plummeted in value, raising concerns about stability and trust. US Treasury Secretary Janet Yellen highlighted risks associated with stablecoins during a Senate panel. Concerns also exist about stablecoins being used for illegal activities. Major corporations like Visa and PayPal are increasingly involved in the cryptocurrency sphere. The Biden administration recommended regulating stablecoin issuers like banks for consumer protection. EU introduced new regulations for cryptocurrency, including stablecoins, in 2023. The Markets in Crypto-Assets (MiCA) regulation in the EU introduces rules like reserve requirements and transaction limits for providers and exchanges. Excitement grows in the US for stablecoins after the GENIUS Act’s passage in the Senate. Grayscale’s Pandl sees regulations providing comfort to users and businesses, ensuring safety and compliance.
The GENIUS Act includes regulations such as 100% reserve backing for stablecoins with over $50 billion market caps. Attention shifts to the House as the STABLE Act and Clarity Act progress. The future of stablecoins and the broader crypto market remain under scrutiny as new bills are introduced. 1. The stock market saw a sharp decline today, with the Dow Jones Industrial Average falling by 500 points. This drop was attributed to concerns over rising inflation and interest rates, as well as uncertainty surrounding global trade tensions.
2. A new study published in the Journal of Pediatrics found that children who spend more than two hours a day on screens have lower cognitive skills. The study surveyed over 4,500 children and found that those who exceeded the recommended screen time limit had poorer language and memory skills.
3. The United Nations announced that over 3 million people have been affected by Cyclone Idai in Mozambique, Malawi, and Zimbabwe. The storm has caused widespread flooding, destroyed homes, and left many without access to clean water or food. Humanitarian aid efforts are underway to assist those affected by the disaster.
Read more at Yahoo Finance: Stablecoins go mainstream after Circle’s blockbuster IPO. Here’s what they do.