Hey Jesstablecoin holders
As the cryptocurrency space continues to grow by absorbing capital, talent, attention and new ideas come into space, it's reaching a point where its less of an irritation to governments and central banks and more of a threat. These traditional financial institutions are starting to see the writing on the wall and like any regime, they will try to stand their ground and protect the status quo for as long as possible.
The latest target in their sites are stable coins, the fiat pegged digital dollar implementation fo blockchain technology.
What are stable coins
Stable coins are a digital representation of a national currency and pegged 1:1 to the fiat currency it represents. One stable coin is usually minted for every 1 unit of currency held by the company creating these coins.
Now we can argue about how this is not decentralized and how this can be used for manipulating cryptocurrency markets but that's a story for another time.
The point here is certain users and traders find value in having access to these digital fiat currencies to protect them during trades and as a way to store currency.
Stablecoins play a leading role in the cryptocurrency ecosystem. The five largest stable coins accounts for two-thirds of all trading volume and USDT has been in the top 10 in terms of market cap for ages.
Image source: - somagnews.com
Banks don't like competition
As we see the dollar continues to strengthen against other currencies due to its reserve currency status we can clearly see the demand for dollars is on the rise. Banks are overleveraged and struggling for liquidity and while cash is scarce.
Stable coins only make this worse by holding on to reserves and allowing heavens outside the bank for deposits. This leaves the opportunity for another avenue other than cash to do a bank run and banks want to limit that systemic risk.
Also, pushing private stable coins out of the game would make the implementation and adoption of central bank digital currencies much easier. We know China, Canada and Sweden have all been looking at CBDC and I think the race is on for central banks to create a digital version of their currency to try and stay ahead of these innovative private companies.
Losing control of the money supply
Central banks and governments don't want to lose control over the fiat currency or have competition over who can issue, manage and distribute currency because it reduces their ability to tax individuals or monitor transactions. It also allows for save heaven from banks who charge fees for using their services as well as eliminating the ablity to impliment negative interest rates which are already in place in Europe and more countries look to follow as they try to keep fiat afloat.
The opportunity for algorithmic or asset-backed Stable coins
If they do regulate stable coins or even outright ban the stable coins backed by fiat currency this could open up an opportunity for gold and silver-backed coins or even algorithmically created stable coins like SBD, HBD, and MakerDAO/DAI.
This could drive the push towards more decentralized stable coin creation and reduce the direct effects money printing can have on the manipulation of the crypto market.
The way I see it is the quicker governments are to try to regulate these projects the quicker the market turns around and innovates to try and find solutions.
Regulation and government control is by no means a bad thing, it shows the limitations of certain projects and pushes communities and supporters of certain coins to rethink the way they operate and will only drive better protocols to avoid being hit by government compliance.
Finance 1.0 is slowly tanking and it's going to do everything it can to discredit its opponent all the way down. I can't say I'm a fan of centralized stable coins.
I do think they need to be held accountable as they've become the fed of crypto printing money at will and out of thin air without producing proof of collateral and that's something the crypto space can do without.
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Have your say
What do you good people of HIVE think? Do you think banning stable coins is a threat for crypto?
So have at it my Jessies! If you don't have something to comment, comment "I am a Jessie."
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