Demand for stablecoins
by Maryna Trifonova, Head of Content at Jax.Network
Stablecoins always become a safe haven when it comes to the bear market, as everyone hurries to make good use of their volatile BTC and altcoins. USDT alone sits at $68 billion, while Bitcoin dominance shrinks to below 40%, according to coinmarketcap.com. At the same time, it seems that people don’t hurry to cash their stablecoins out either. Are we at the dawn of worldwide stablecoin adoption?
Stablecoin adoption and regulation
Stablecoins are one of the hottest topics right now since heated discussions around their proper regulation, worldwide adoption, and failed projects like Terra (UST) still take place. Policymakers all around the globe have set their eyes on stablecoins either trying to roll out a CBDC or introduce some regulations. For example, Brazil is working on a number of stablecoins, including a fiat real-pegged token. Several cities in Switzerland already allow their citizens to pay taxes in crypto. Meanwhile, Singapore’s Central Bank is looking into ways that will help it make the stablecoin market safer for retail users. Peru nationals embrace stablecoins as a hedge against inflation and political instability.
It’s also important to mention that the Bank for International Settlements (BIS) Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) worked out a regulatory framework for the settlement of stablecoin payments around the world in July. It provides clear guidance on stablecoin arrangements primarily used as a means of payment, assisting market participants in delivering better services as they develop and operate their stablecoin-related products and services.
Interestingly, stablecoin volume reached an all-time high last month witnessing the adjusted on-chain volume of $866 billion. It is an 86% year-over-year gain from August 2021’s figure of $464 billion. Furthermore, the recent report by Chainalysis unveils that overall adoption slows worldwide due to the bear market, but remains above pre-bull market levels.
How does JAX fit into the picture?
We at Jax.Network made the job for regulators much easier, as we designed a coin that is already free from all the issues that some other stablecoins, especially algorithmic ones, have. JAX is costly to produce, so there won’t be much inflation or excessive printing sprees. Furthermore, JAX mining is not correlated with JXN mining in any way, so there’s no room for market manipulation like it was in the case of UST, where new coins could be created by burning LUNA.
To know how many JAX coins there are in circulation, anyone can simply take a look at our blockchain data, which is fully auditable in real time. These coins are intended purely for transaction purposes, as the utility coin JXN is bound to reflect the success of the entire ecosystem by increasing its value. In addition, it’s JXN that is used in staking, yield farming, and any other DeFi-related matters, leaving JAX away from any potential exposures.
Potential risks to keep in mind
According to the report published by the European Central Bank, stablecoins may bear some risks to financial stability via different means, including (i) financial-sector exposure, (ii) wealth effects (changes in the value of crypto-assets that affect investors with subsequent knock-on effects), (iii) confidence effects (developments in crypto-assets that affect investor confidence in these markets with potential knock-on effects), and (iv) the use of crypto-assets for payments and settlements.
Given the four points mentioned above, it’s still critical to remember that not all stablecoins will be there even a few years from now. Terra’s UST is a vivid example of this. And even within the properly regulated field, nobody is 100% safe from misfortunes. Therefore, users should always do thorough research on the stability mechanism, reserves in fiat and cryptocurrency, and liquidity of the stablecoin they intend to buy.
Stablecoins make up a big chunk of total cryptocurrency market capitalization and may play a vital role in overall cryptocurrency adoption. Jax.Network understands the importance of a risk-free stablecoin that is impossible to manipulate for personal gains and will continue to facilitate crypto adoption.
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