Uncertainty remains under the continuous growth of Stablecoins, Regulatory restrictions and the open letter of Circle

MYKEY
MYKEY
Jan 7 · 8 min read

Original link: https://bihu.com/article/1999493307

Original publish time: January 6, 2021

Original author: Xiang Yao, researcher of MYKEY Lab

We released MYKEY Crypto Stablecoin Report to share our interpretation of the development status of stablecoins and analysis of their development trends to help the participants in the crypto market stay updated on the development status of stablecoin, looking forward to maintaining communication with the industry and exploring the development prospects of stablecoin together, please feel free to leave suggestions.

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  • The market capitalization of major stablecoins has increased by $24.66 billion to $28.25 billion, a monthly average increase of 11.5%.
  • Last month, the circulation of USDT, USDC, DAI, and BUSD increased by 1.850 billion, 940 million, 110 million, and 293 million, the circulation of the remaining stablecoins decreased slightly.
  • The circulation of USDT exceeded $20 billion, the circulation of USDC reached $4 billion, the circulation of BUSD approached $1 billion.
  • Members of Congress proposed the STABLE Act, which is intended to regulate stablecoin-related behaviors, which has caused strong controversy.

1. Overview of Stablecoin Data

First, let’s review the changes in the basic information of the various stablecoins in the past month(December 1, 2020, ~ December 31, 2020, same below).

Source: MYKEY, CoinMarketCap, Coin Metrics

At present, the market capitalization of major stablecoins has increased by $2.99 billion to $28.25 billion. The average daily market capitalization in December was $26.63 billion, an increase of $2.758 billion from the past month. The figure below shows the monthly average change of the circulation of the stablecoin, that is, the daily average circulation in December minus the daily average in November.

Source: MYKEY, Coin Metrics

Among them, the main growth comes from Tether. Tether has additionally issued a total of 1.850 billion, specifically 1.0 billion on Ethereum and 850 million on TRON. The circulation of USDC increased by 940 million, reaching $4 billion on December 31, 2020 (from the Circle official website), of which 3.913 billion was on Ethereum, and the rest was on Solana and Algorand. It needs to be emphasized that most media, including Forbes, only count data on Ethereum, which is not accurate. The market capitalization of the remaining stablecoins has not changed much.

Source: MYKEY, Coin Metrics

Last month, the average daily active addresses of major stablecoins were 227,000, an increase of 0.12% from the past month.

Source: MYKEY, Coin Metrics

Compared with the previous month, the number of daily transactions of major stablecoins increased by an average of 2.50%. Among them, the growth rate of DAI is remarkable, from an average of 14,000 daily transactions to 48,300, an increase of 45.2%.

Source: MYKEY, Coin Metrics

Source: MYKEY, Coin Metrics

The daily volume of transactions of major stablecoins increased by $903 million, an increase of 18.32%.

2. The boundaries of stablecoins continue to expand

The entire stablecoin and the ecology are still booming. The amount of funds has steadily increased, and the monthly supply of major stablecoins has increased to $3 billion, of which USDC has increased by $1 billion in one month, the total supply has reached $4 billion, and the total supply of BUSD has also approached $1 billion. The main body and platform are more abundant, the euro stablecoin EURB is launched on Stellar, and HUSD announced that it would be deployed on Nervos.

In December 2020, the supply of major stablecoins increased by $3 billion per month, of which the main contribution came from USDT and USDC ($18.50 and $940 million). The total supply of stablecoins reached $28.2 billion, doubling in 5 months.

On December 9, 2020, the Stellar official website announced that the euro stablecoin EURB is launched. This is the first stablecoin directly issued by a banking institution on Stellar and the first issuance of this type of stablecoin in the market. The specific issuance method of EURB is that the blockchain technology service provider Bitbond provides operations such as the issuance and redemption of EURB on Stellar, while the euro is hosted by Bank von der Heydt. Philipp Doppelhammer, a member of BVDH, said that EURB would be integrated into DTransfer, a payment service based on Stellar provided by SatoshiPay.

Bitbond issued a Security Token approved by the BaFin in 2019.

On December 8, 2020, according to the official blog of Nervos, the compliant stablecoin HUSD will be deployed on Nervos, becoming the first stablecoin collateralized by legal currency on Nervos, and Nervos will also become the first non-access blockchain deployed by HUSD outside of Ethereum.
HUSD Token is a compliant stablecoin issued by the financial technology startup Stable Universal in cooperation with Paxos Trust. It is anchored 1:1 with the U.S. dollar. The U.S. dollar assets are hosted by Paxos Trust and audited and certified by a top American audit company.

3. The stablecoin bill caused controversy

Regulatory issues for stablecoins continue to heat up. On December 4, American Congressmen proposed the ‘STABLE Act’ to regulate the issuance of stablecoins, ‘protect consumers from risks brought by emerging digital payment tools’ and prevent the emergence and growth of abusive, opaque, and stablecoin-based shadow banking systems. The bill is pending approval, and there is no doubt that this proposal has caused a strong controversy in the cryptocurrency community.

According to documents on the official website of the US Congress and reports from Forbes, the ‘STABLE Act’ contains the following content. First, the issuers of stablecoins need to comply with state laws or currency transfer laws; second, they must fully comply with existing banking regulations; besides, the issuers of stablecoins may not issue stablecoins until six months after obtaining approval from the Federal Reserve and the FDIC; finally, the issuers of stablecoins need to obtain FDIC insurance or directly deposit reserves with the Federal Reserve. The approach of the current issuers is to cooperate with FDIC-covered financial institutions.

The proposal is pending approval, and another report of Forbes explains it. The article believes that the current stablecoin ecosystem has two major risks. One is KYC/AML. Users holding stablecoins cannot belong to a forbidden set and should be associated with their identities to report to the tax system; the other is an equivalent Exchange relationship between stablecoins and the US dollar, which needs to be achieved through full reserves. This may be the motivation for congressmen to sponsor the bill.

Although the bill has not yet been approved, it has undoubtedly caused controversy in the cryptocurrency community, especially from issuers of stablecoin. Circle CEO Jeremy Allaire said on his personal Twitter that the bill is a huge step backward in the innovation of digital currency in the United States and restricts the development of the blockchain and financial technology industries. He believes that the cryptocurrency industry is providing solutions that fundamentally improve the speed, availability, cost reduction, and efficiency of the U.S. and global payment and banking services and that Congress should support open innovation rather than forcing non-bank fintech companies to bear the huge regulatory burden from the Federal Reserve and FDIC. The technology and governance standards of stablecoins should be negotiated and new forms of regulatory regulations should be considered. Circle looks forward to constructive cooperation with federal agencies and the private sector will continue to innovate in this area. Besides, Jeremy Allaire also sent an open letter to the U.S. Department of the Treasury, stating the development status of USDC and offering a response to FinCEN’s proposed non-custodial wallet transaction reporting rules.

According to the collation of CoinTelegraph, other opinion leaders also expressed opposition. Meltem Demirors, chief strategy officer of CoinShares, said that ‘cryptographic currency reduces the cost of providing services to people who have historically been excluded from the banking sector. If the bill is introduced, service costs will increase, compliance will become more difficult, and will, in turn, put the cart before the horse’. Tyler Lindholm, a member of the House of Representatives of Wyoming believes that the bill violates the basic spirit of a decentralized system. The cryptocurrency industry has provided financial services for people without bank accounts, and centralized power is not suitable for a decentralized world. Shapeshift CEO Erik Voorhees also believes that the bill is doomed to fail and cannot be forced to make the crypto industry operate as a bank.

Tips

This is what we’re sharing in this MYKEY Crypto Stablecoin Report, welcome to stay tuned for follow-up crypto stablecoin reports. We will provide you with more analysis of the development status, trends, and international impact of stablecoins to help readers stay updated on the development status of stablecoin.

PS: MYKEY Lab has the final right to interpret the content of the article, please indicate the source for the quotation. Welcome to follow our official account — MYKEY Lab: MYKEY Smart Wallet.

Past Review

Crypto Stablecoin Report 18: The market capitalization of stablecoins increased to $18.53 billion, The rise of CBDC

Crypto Stablecoin Report 19: The market capitalization of stablecoins reached $19.86 billion, The latest development of several decentralized stablecoin protocols

Crypto Stablecoin Report 20: The market capitalization of stablecoins reached $20.62 billion, Stablecoin regulatory policy of the United States

Crypto Stablecoin Report 21: Stablecoin stepped out of Ethereum, Global stablecoins triggered the regulatory awakening

Crypto Stablecoin Report 22: The Supply of DAI Exceeded 1 billion, USDC was Used to Aid Venezuela

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