Rise of Stablecoins: How COVID-19 Is Transforming E-commerce

COVID-19, better known as the coronavirus, is rapidly spreading all over the planet, interrupting our lives and causing severe material damage. On March 11, the World Health Organization declared the global coronavirus pandemic. The scale of the unfolding grave situation looks deeply disappointing.

The deadly virus has made huge strides in all continents, excluding Antarctica. Most developing countries have been sounding the alarm and introduced a strict quarantine regime. Authorities are enforcing a state of emergency, canceling mass events, and asking residents to stay away from crowded public areas. In the general context of the crisis, the coronavirus has not left the crypto industry untouched.

Even before the crypto price boom of December 2017, differing views were expressed about the future of Bitcoin and other digital assets. They were believed to become full-fledged alternatives to traditional (fiat) money. At that time, only crypto enthusiasts believed in such an idea. However, today’s circumstances make us seriously reconsider this issue.

What Will Happen in the Crypto Market During the Pandemic?

In view of the seriousness of the events, we can expect that the coronavirus would drastically affect the further development of the crypto industry. Stablecoins can be considered protective assets that remain more sustainable comparing to other virtual currencies. Their price will not go up and down. This means that by investing in them, you receive assurances of the safety of your funds even in the global economic crisis. Tim Draper, the leading venture capital and cryptocurrency investor, commented upon the future of America’s currency. He submits that the pandemic that has crashed the stock markets can be a key factor for a large-scale move towards stablecoins and other digital assets. The traditional American recipe for economic salvation is seen as a primary factor. Namely, the infusion of enormous amounts of money ($7 trillion) into big business. The sky is not the limit, right? Tim firmly believes that current conditions will lead to erosion of confidence in the dollar. Such statements cannot but affect the investment market in favor of crypto assets purchase.

In the cryptocurrency market, within the natural law of evolution, there are more large players with enormous resources behind them. They can seriously affect investors’ preferences. Their confidence in cash is minimal today. In the present situation, you can trust only working investments that influence the capitalization and scaling of companies. Gone are the days when a dollar account was a guarantee of funds’ safety. After the crisis, if properly managed, every dollar invested in the capitalization and maintenance of the company will grow at times. Otherwise, the dollar will inevitably lose its value. And as a result of the tepid reaction of most of the cryptocurrency market players to cash, we see that the services provided by serious companies are better and more diverse than those that can be found in the world of fiat money.

Will Stablecoins Replace Fiat Money in 2020?

The position of fiat money remains inflexible by 2020. Well, that’s understandable, considering that the crypto is relatively new while the grandfathers of modern paper money appeared in the fourth century BCE. In addition to age, digital and fiat money have a whole set of distinctive features. However, traditional assets are valuable because the state claims so. What about stable coins? Let’s highlight their obvious strengths:

• The main advantage of a stable coin is its immunity to volatility and inflation. It can be used for issuing and receiving consumer loans and for various other purposes, without fear that the token rate may change in any direction during the transaction.
• The use of such coins will expand access to a stable currency for those who need it. The relative stability of the US dollar against the currencies of other countries is taken for granted today. Of course, inflation gradually devalues the dollar, but only slightly, if you take into account the situation in developing countries, where money can lose the value by 15% or more per year. People of such states are forced to keep their savings in dollars, despite restrictive measures by regulatory authorities that can be imposed on any transactions with foreign currency. An easily accessible digital decentralized tool with a stable price would be a great alternative for people living in countries with unstable monetary systems and strict state capital control.
• Another promising application of blockchain technology and cryptocurrencies today is their use as an infrastructure for the financial ecosystem with fewer intermediaries, and consequently fewer costs for paying commissions. However, for the formation of a capital market around digital assets the stability of this sector is necessary.
• Many market participants are looking for opportunities to hedge their risks, especially when the market is in decline. A stable coin is an opportunity to meet this need. It should be noted that this direction is actively developing, attracting more and more institutional investors.
• Despite the criticism, the number of projects involved in stablecoins creating is growing. Some devs offer various assets or fiat currency as support for such coins. Many projects seek to link them to other digital assets. The third type of project is all about the creation of algorithms that automatically control the supply of coins so that the price does not fluctuate relative to the underlying asset.
• A major crypto exchange Coinbase has already added stablecoins to its cryptocurrency payment service Coinbase Commerce. Now users are able to accept payments in USDC without a transaction fee.
• Tozex’s BRO allows stablecoins, and this decision is based on the growing number of this type of cryptocurrency — the situation clearly demonstrates that more and more market players start choosing stablecoins due to their low price fluctuations and reduced risks.

You can receive funds from any country around the globe. What is more, you don’t even need to open a traditional bank account to store them. Using stable cryptocurrency as a settlement tool provides sellers with all the advantages of crypto without the volatility risks inherent in coins with a “floating” rate. Perhaps, stable coins will give digital assets a “second life”. According to the European Central Bank, the virtual currency has little effect on cash flows precisely because of the refusal to accept it as payment for goods and services.

Final Words

It is obvious that a stable currency exchange rate is one of the primary and fully justified goals of financial regulators. Stability gives people the opportunity not to spend time and resources trying to protect their savings from depreciation. Stable coins can become the basis for the international lending and derivative financial instruments market, which will have a high degree of reliability and security for all participants.