In many of my previous blogs, I have explained the concepts of cryptocurrency and stablecoins. Cryptocurrency uses blockchain decentralized network that operates independent of a central bank or government. At the same time, it uses cryptography for security purposes. It is subject to volatility and is influenced by demand and supply, market sentiment, etc. The value of cryptos is based on the utility of their networks.
Stablecoins, on the other hand, are cryptocurrencies made stable by pegging them to a real asset such as government or fiat currency or Treasury Bills. The value is kept close to the value of the asset chosen. That results into low volatility.
You can call cryptocurrency a designer bag which comes in a wide assortment — all shapes and forms. Stablecoin is similar to a briefcase — though useful, it is not flashy. It transports the contents reliably.
The US Congress has passed the Genius Act — the Guiding and Establishing National Innovation for the regulation of US stablecoins. The Act has legitimized the stablecoins, escalating the whole crypto market capitalization past $ 4 trillion, which is a figure higher than India’s GDP.
The regulatory provisions have ushered in ‘stablecoin summer.’ Facebook, Visa, Amazon and Walmart — all these private players have become crypto friendly. They will join the stablecoin race. Cryptos could be considered as alternative mode of payment. It will spread the adoption of cryptos. Visa and MasterCard treat stable coins as complementary rather than competitive. Salaries can be rolled out in terms of cryptos in future.
Doller-based stablecoins could compete with local currencies. A new age is being heralded for cryptos. The US is the largest capital market. There are dissenting voices. Stablecoins could serve as surveillance tools. There is Anti-CBDC Surveillance Act blocking US CBDC before the Senate.
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