Stablecoins have become an integral part of the cryptocurrency market. They represent a simple entrance gate for the purchase of cryptocurrencies. Also thanks to the creation of the DeFi sector, their use is also possible for passive income, not just for the purchase of cryptocurrencies. However, the growing popularity is increasingly attracting regulators, who often have no positive attitude towards the ideology of stablecoins.
They break records
Capitalization of stablecoins is growing substantially. The growing amount of stablecoins in circulation often indicates the growth of cryptocurrencies, because mainly large investors buy stablecoins first, followed by cryptocurrencies. Tweets on Whale Alert’s Twitter account often announce the creation of sometimes hundreds of millions of USD of new stablecoins. However, such announcements have been the subject of various speculations, with Tether himself being accused of market manipulation on several occasions.
Possible regulatory problems
However, stablecoins and their growing popularity lie in the stomachs of large government financial institutions and regulators. This is because states and banks have no supervision or power over the stablecoins. ECB officials have even said that stablecoins pose an open risk to sovereignty.
The problem with stablecoins is that they slide through regulatory cracks. They are not classified as bank deposits, so the Fed and the Office of the Currency Controller have a limited ability to supervise them. The SEC has some power when defined as securities, but this is a matter of active debate. Regulators are now examining their options, of which there are several. The most likely are:
– Treat them as securities: Governments could label stablecoins as securities, which would bring higher demands for their introduction. SEC President Gary Gensler told lawmakers at a recent meeting that stablecoins could also be securities, giving his institution more power. As for the SEC, we recently informed you that the SEC is threatening a crypto exchange Coinbase if it launches their new USDC-based lending product.
– Treat them as banks: Due to the lack of supervision of MMFs, many financial regulation enthusiasts would prefer stablecoins to be considered bank deposits. If this were to happen, the tokens could be subject to the supervision of a banking regulator, such as the Office of the Currency Controller.
– Try to destroy them using CBDC: If you had a digital dollar, you wouldn’t need stablecoins, you wouldn’t need cryptocurrencies. These are the claims of financial institutions that are pushing the digital currencies of central banks to the forefront. However, for the average user, this would mean that every purchase of chewing gum, every installment for an apartment, everything could be monitored by banks and, thanks to the digital world, restricted and regulated in various ways. This is the most unacceptable option from the crypto community’s point of view. People would lose the last bit of privacy and independence they have left.
– Regulation based on common agreement: From the community’s point of view, this is the most acceptable option. If stablecoin providers find common ground with government and regulators and agree, both parties can benefit.
DeFi CeFi lending
The boom in decentralized finance has opened the gates to stablecoins. The emergence of lending platforms that offer services similar to banks offers a wide range of uses for stablecoins. While in the bank you get an annual interest rate of around 0.01%, in the lending sector you can easily get 10% on stablecoins. Of course, the whole lending space is not only based on stablecoins and you can also pay interest on other cryptocurrencies, but now we are focusing specifically on this area. As we wrote above, the SEC does not like lending, because it completely bypasses traditional banking and banks thus lose considerable profits.
You can choose decentralized lending – DeFi or centralized lending CeFi. The difference, as the name suggests, is that with centralized lending, you have a management platform that acts like a bank and manages loans, interest, fees, and the like, unlike decentralized ones.
The largest decentralized lending platform is current Aave with a total value of $ 14 billion in locked funds. On the other hand, the largest centralized lending platform is Celsius with funds of over $ 24 billion. On the Celsius You can pay interest on various cryptocurrencies such as BTC, ETH, stablecoins and many more at an interest rate of up to over 10%. New users can currently get a bonus of up to $ 110 for free.