USDT issued by Tether takes the lead in the stablecoin market with its first mover advantage. However, the frequent occurrence of incidents such as opaque account funds, mortgage rate issues, and the alleged random additional issuance of USDT has driven the market to doubt USDT many times and have also allowed the latecomers in the stablecoin sector to find the proper direction with their efforts. One of the main edges for USDC, the second stablecoin for a long time, is compliance.
With the support of Coinbase and Circle, USDC has already begun gearing up in early 2021. The SEC changes its head and the digital currency market soars in this year. The stablecoins collectively are under a less stable market regulatory environment. In the past two weeks, relevant U.S. regulatory agencies have frequently showed attitudes about the supervision of stablecoin.
Jan. 5 saw the U.S. Office of the Comptroller of the Currency allowed banks to issue and use stablecoins for payment. On the other hand, according to the data from debank, the supply of stablecoins on Ethereum increased from $3.425 billion at the beginning of the year to $21.92 billion, an increase of 516%. Among them, the supply of USDT ranks first, accounting for 63.29% of the total supply of stablecoins, followed by USDC, accounting for 20.36%.Source: debank
Jeremy Allaire, the founder of the USDC issuer, has been active in Twitter recently, and it seems that he can't bear its current landscape.
On the evening of January 4, the United States’ largest banking regulatory agency, the Office of the Comptroller of the Currency (OCC) of the U.S. Department of the Treasury, announced on its official website that U.S. banks would be allowed to use chains and USD stablecoins as the settlement infrastructure in the U.S. financial system.
The document stated that banks may use stablecoins to facilitate customers' payment transactions on the independent node verification network, including the ability to issue stablecoins and exchange the stablecoins for legal tender.
In response, Jeremy Allaire, CEO of Circle, which is the issuer of USDC, posted 9 consecutive tweets, speaking highly of the "great victory" of this digital currency and stablecoin.
As early as the second half of last month, the US President's Financial Market Working Group reiterated its position on stablecoins. According to the relevant statement, “The United States encourages payment innovations that include US dollar-backed payment systems and related stablecoins, but stablecoins must comply with applicable U.S. laws, regulations and regulatory requirements."
These regulatory requirements mainly cover that stablecoins must comply with anti-money laundering, anti-terrorist financing, and one-to-one redemption regulations. There are indications that the US authorities' regulatory framework for stablecoins seems to be still tightening. As a compliant USD stablecoin jointly issued by Coinbase and Circle, USDC is considered a beneficiary under the new regulatory framework. This second-ranked stablecoin has only been launched for more than two years, and it has recently expanded its market share again, and its issuer's payment ambitions in digital assets have been disclosed.
2021: Stability and Instability of Stablecoins
In addition to USDC’s progress of compliant stablecoins, the stablecoin DAI of MakerDAO, a decentralized autonomous organization on Ethereum, has emerged. In terms of liquidity and trading volume, although Tether still maintains its leading position in the near term, other stablecoins may still catch up.
While innovative products continue to emerge, supervision is gradually becoming stricter. In November 2020, members of the US Congress jointly proposed a draft of the STABLE Act. The draft requires stablecoin issuers to hold a bank license and must be approved by the competent authority before issuing the currency. This move instantly gave rise to many dissatisfactions in the crypto community. Later, when the US White House Financial Markets Working Group released its comments on the draft, although its attitude was moderate, it still did not further clarify the legal status of stablecoins.
The dispute continues, and some uncertainties still remain.
However, many people remain optimistic about this. With the maturity of blockchain technology and the emergence of more applications, the stablecoin market has gradually matured. If crypto assets are finally used for international payments and global remittances on a large scale, then stablecoins will naturally become a real cryptocurrency transaction medium. Since stablecoins are the new entrance adopted by cryptocurrency users, its importance is self-evident.