2 years ago
162 FinanceFeeds -
Stablecoins are a form of crypto that arose much later than the likes of Bitcoin but have quickly caught the imagination of crypto enthusiasts as their value is pegged to specific national fiat currencies, like the USD, and is also supposed to be backed up with actual fiat reserves. Companies that sponsor such stablecoins, like Tether Limited and Circle are expected to have USD reserves that are equal to the number of stablecoins in circulation and the fact that they are pegged to the fiat currencies but can be moved around very quickly, securely and anonymously has led to it being the preferred form of payments in the crypto industry.
While Bitcoin and other cryptos are subject to a lot of price volatility, stablecoins do not change in value and are not volatile which makes it a darling among the crypto masses. But this is a headache for regulators and authorities as it directly competes with the fiat currencies in terms of utility but with zero regulation or control behind them. Stablecoins like the USDT have billions of dollars in circulation but no one is yet sure on whether they are actually backed by the USD in reality. This opens up the possibility that there could be a bank run and the investors and traders would be left exposed in case there isnt enough USD to back them up.
The US government would be looking to regulate and control the flow of stablecoins and it is also reported that the Treasury would be seeking advice and comments on whether it should launch its own digital currency which can be stored and circulated in digital wallets and this will further reduce the dependence on cash which is fast losing relevance in this increasingly digital world. It could also seek to bring the stablecoins under government control with licensing being required for the same but it remains to be seen how this would pan out and whether the regulators would seek to audit the companies that are sponsoring such stablecoins to ensure that there is enough USD in reserves to back them up.
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