Stablecoin regulation and the concept of mass stablecoin use grows daily. What began with news of an unfortunate crash highlighting the “risks” of stablecoins continues to snowball into a globally supportive movement for fiat-backed stablecoins.
The key to understanding: algorithmic stablecoins, relying upon an algorithm to maintain a hard peg to an external asset, suffer from a shaky foundation. The goal is creative, novel–even noble, in its hope to remove fiat’s inflationary influence. Yet can an algorithm deal with freefalling markets?
No. Investors and regulators alike learned, very quickly, that introducing volatility or unguaranteed assets anywhere in the chain of a stablecoin’s reserves almost guarantees disaster. Remove that monkeywrench and we have something of a masterpiece.
The European Council introduced a comprehensive framework effectively accepting fiat-backed stablecoins. The United States purported legislation calling for stablecoin regulators and protections for crypto investors, although this is in flux until September.
But why, all of a sudden, the mad dash from governments across the world? The answer lies in market capitalization. For example, Tether reached over 83 billion USD in 2022, from under 1 billion USD in 2017.
This article delves into the top five fiat-backed stablecoins and what you need to know before regulation is likely passed everywhere.
Read more here.
