BARELY one per cent of people in America use cryptocurrencies to settle transactions. Stablecoins, on the other hand, have already overtaken PayPal’s $1.7 trillion annual settlements.
In fact they are fast catching up on Mastercard which settles some $9 trillion.
People are embracing the simplicity of stablecoins as a medium of exchange, and this very ease is what leads regulators to want to enforce straitjackets onto them.
In basic terms, stablecoins can act as a direct proxy for fiat currencies, but without the transaction faff. In essence that means that there is some $8-10 trillion of transactions out there where the ruling authorities have no control. It doesn’t take a lot to realise that no central bank authority wants such a large amount of very liquid funds not under its direct control.
Two of the plus points are that stablecoin transactions are on blockchains other than Bitcoin and hence transact almost instantly and at a fraction of the cost of a normal Bitcoin transaction.
True, Bitcoin’s lightning network addresses these concerns but not without a bit of technical knowledge, whilst any cack-handed person with a phone can easily both understand and operate in the world of stablecoins.
Stablecoins are almost the same as having a bank account where you can move cash about to your hearts content. The other side of the equation is that they are so like fiat currencies that they inherently have the same issues and problems that bank-account money has, not least that the authorities can ban them.
We’ve just seen USDT (Tether) banned across the EU and Coinbase in the UK because it does not comply with MiCA (Markets in Crypto Assets Regulation). What these regulations seek to do is enforce transparency on transactions, enforce disclosure of said transactions and link that to the authorisation of them.
There is also a check on supervising the transactions. In Tether’s case there has long been an issue about the transparency of its assets and whether they do actually cover all the outstanding USDT. USDC doesn’t have that problem – it started from a point of transparency and has resolutely stuck to it.
I personally would be fairly confident that Tether is already working on complying somehow. The sums of money involved are so large that it is worthwhile making it work, even at the cost of quite a few millions. And Coinbase, as of today, still seems to be operating USDT just not in mainland Europe. I was able to buy and sell on Coinbase after the January deadline.
As a result, stablecoins work extremely well as a method of simple payment where speed and certainty NOW is needed. If you are paying for your coffee you don’t want it ten minutes (or longer) from now you want it NOW. Stablecoins can do this for you.
As I’ve said before settling a transaction in America from overseas using stablecoins takes literally seconds and costs virtually nothing. Doing it through a traditional bank can take a couple of weeks and cost a significant percentage of the transaction total.
Bitcoin is different. It stands as a beacon of resistance to all blandishments and efforts to undermine it. Even the Americans have confirmed it fails the Howie test and is therefore not an investment instrument that requires to be directly regulated.
Yes, lots of things around Bitcoin DO need regulation (exchanges are the obvious immediate example) but the coin itself does not. It has its own rules and mathematical construct that is unshakeable, and much more indestructible than the currencies that governments around the world use in their own countries. As a result, Bitcoin works best for large transactional settlements and as a longer term store of value.
Yes, the price goes up and down but – so far at least – its value continues to rise over time.
And as long as the liquidity cycle continues to operate, then Bitcoin will remain a solid store of value, even if somewhat clunky.
