September 19, 2021

Stablecoin market capitalization exceeds $120 billion 

Stablecoin market capitalization exceeds $120 billion

The aggregate market capitalization of the stabilitycoin market exceeded $120 billion. More than half of the supply (~$72 billion) falls on the segment leader - Tether (USDT).

Messari analyst Ryan Watkins attributed the rapid growth of the stablecoin sector to the fact that they are "the best means of storing and moving U.S. dollars around the world."

Stablecoins are used to move capital between exchanges, as collateral on crypto derivative platforms, in decentralized finance applications, and in cross-border payments, he said. In Q2 2020, the volume of transactions involving these assets exceeded $1.7 trillion - a 14-fold increase in 12 months.

Watkins noted that Stablecoins are convenient to accept as a means of payment because they require only a public address on the blockchain. Their infrastructure works without interruption, allowing for privacy.

In addition, stabelcoins are programmable assets, which means developers can create applications based on them.

According to Watkins, the U.S. dollar accounts for about 55 percent of international transactions, so there is a global demand for the U.S. currency, especially outside of the U.S. financial system.

He noted that because of the above properties of stable coins, more and more financial institutions in the U.S. domestic market are moving transactions to blockchain. This move allows them to reduce their cost structure.

Outside the U.S., stablecoins provide individuals and institutions with easy access to U.S. currency. In his opinion, these assets could "take over" the offshore dollar market in the future. Citing data from the Bank for International Settlements (BIS), Watkins estimated the latter at more than $57 trillion. 

While the size of the offshore dollar market (dollar deposits outside the U.S.) is difficult to estimate, BIS data suggest that it could be more than $57 trillion. This may seem crazy, but it is this market that Stablecoins are beginning to claim, he wrote.

Watkinson noted that potentially stabelcoins could be a "big problem," so he understands why regulators are "keeping a close eye on this market."

In July, the Fed said at a meeting that the lack of transparency about stablcoins could threaten financial stability.

Earlier, U.S. Treasury Secretary Janet Yellen called for a regulatory framework for steel coins as soon as possible.

In early September, the head of the SEC Gary Gensler also pointed to the risk of widespread use of stablcoins, mentioning the project Diem, which is being developed with the participation of Facebook.

Recall that the U.S. Treasury Department plans to require issuers of stablcoins to ensure their free conversion into fiat, according to Bloomberg. 

Jack Evans

About the author

I became a crypto asset owner in 2014, when the industry was in its infancy. Before that, I was working in the classic US and European stock markets. Since then, I have gained extensive experience in both cryptocurrency investing and day trading. I am happy to share with readers my experience with crypto exchanges, DeFi and NFT instruments. 

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