Stablecoins have grown in reputation to the point where they have now become a class valued at over $100 billion. Thanks to a basic assumption that has bolstered their whole appeal. They support safe-haven assets, such as fiat currencies, most notably the dollar, which gives them real-world credibility and renders them less susceptible to price volatility.
Cryptocurrency investors and businesses who scare off by the volatility of popular coins like Bitcoin and Ether may consider stablecoins. An increasing number of “decentralized finance” (DeFi) applications emerged, with Visa and Walmart among the Fortune 500 companies entering the race.
Stablecoins have grown in popularity as a favored method for crypto investors to move assets and trade other crypto tokens.
In light of recent disclosures involving one of the most widely used stablecoins. With the dollar-backed USD Coin (USDC), new doubts raise regarding whether stablecoins are always what they claim to be.
USDC Regulation
USDC regulates as a stored value instrument (just like a pre-paid card). Stored value products regulate under state plutocrat transmission laws. Circle, as the issuer of USDC, audit regularly by 46 state controllers. Moreover, the state controls the backing of USDC, giving companies like Circle a list of acceptable investments in which the USD backing USDC can invest.
In fact, these are the same laws that cover the edicts that plutocrat guests hold at Coinbase or PayPal. Also, these laws are client protection laws, designed with the clear purpose of knowing that the stored value is safe. (You can see the composition of the means supporting USDC at that point—they all have investment-grade credit conditions.)
Stable coins are significant because they facilitate transactions in cryptocurrencies like Bitcoin. They build a link between old-world money and new-world cryptocurrency.
However, many stable coins back by short-term liabilities that are prone to illiquidity, making them difficult or impossible to trade in difficult circumstances. Even though they have a shaky backing, the stable coins themselves guarantee to function as perfectly safe holdings.
