Date: 05 January, 2024
In the decade since their introduction as an asset class, stablecoins in the cryptocurrency market, touted for their stability amidst market volatility, have fallen short of delivering on their promised consistency. Researchers at the Bank for International Settlements found that none of the 68 studied stablecoins have managed to maintain a constant peg at all times.
Prominent stablecoins such as Tether and USD Coin, which peg their values 1:1 to the US dollar, function as a bridge between virtual and real-world representations of currency, primarily within the context of crypto trading. Despite their role in this niche, their practical use is limited beyond the crypto community. For the wider population not engaged in Bitcoin or Ether transactions, the perceived security of keeping money in a bank with deposit insurance remains the preferred choice.
This discrepancy in the efficacy of stablecoins raises questions about their broader adoption and functionality outside the cryptocurrency community, where traditional financial systems continue to hold sway in terms of perceived reliability and stability.
Key Points:
- Stablecoins in the crypto market, intended for stability, have fallen short of delivering promised consistency.
- Bank for International Settlements’ research shows none of the 68 studied stablecoins maintained a constant peg.
- Leading stablecoins like Tether and USD Coin, pegged 1:1 to the US dollar, act as a bridge in crypto trading.
- Their practical use is limited outside the crypto domain, posing questions about broader adoption.
- For individuals not involved in Bitcoin or Ether transactions, traditional banking with deposit insurance is perceived as more secure.
- The efficacy gap of stablecoins raises concerns about their functionality beyond the cryptocurrency community.
References:
https://economictimes.indiatimes.com/markets/cryptocurrency/asian-consumers-could-soon-be-paying-with-stablecoins/articleshow/106559059.cms?from=mdr#:~:text=Synopsis,after%20three%20years%20of%20efforts.