The adoption of stablecoins by US-based consumers is facing a delay in 2024 even as there is increasing activity in Bitcoin, which has risen in popularity following the launch of the Bitcoin exchange-traded funds.
The chart below shows a decline in the number of transactions made by US-regulated platforms in just under a year. This can be attributed to the growing problem of US-based stablecoins in terms of regulation and adoption in the country.
This indicates that emerging market stablecoins with bases outside the US are experiencing higher deployment. If stable coins While we are seeing increasing usage globally, these types of digital assets are being used in every nook and cranny of the world to transfer value and conduct low-cost transactions.
Share of stablecoin inflows to exchanges regulated in the United States and those not regulated in the US. Source: Chainalysis
Global demand for US dollar-backed assets
As countries strive for a more stable asset base, mostly in the form of the dollar, stablecoins will help improve global financial inclusion, especially in areas where there are few or no stable currencies. Such a need for reliable and well-kept assets will drive the use of stablecoins.
As of today, the market cap of cryptocurrencies stood at $2.26 trillion. Chart: TradingView.com
By the end of 2022, it was observed that approximately $1 trillion worth of US dollars had been found abroad, which is approximately equal to about half of the total amount of US dollars. Offer of US dollars which only further highlights how stablecoins are increasingly replacing dollar cash in markets where local currencies are prone to volatility.
Image: Built In
The results are consistent with the words of Tether CEO Paolo Ardoino, who recently stated that stablecoin demand comes mainly from developing countries such as Argentina, Turkey and Vietnam. In such regions, people are looking to stablecoins to protect against inflation and currency erosion and are therefore increasingly adopting them as financial instruments for daily transactions and deposit purposes.
Stablecoins: Regulatory Challenges and the US Position
The lack of an appropriate framework for digital assets places the United States at a competitive disadvantage; financial centers in Europe and the United Arab Emirates are attracting stablecoin projects due to a much friendlier regulatory environment. According to Chain analysisCompanies like Circle have pointed out that the lack of a U.S. regulatory framework for stablecoins could pose a threat to U.S. interests.
More countries are coming forward with clear guidelines encouraging the use of stablecoins, and the US is not lagging behind in the call to action; Chainalysis believes that it is this regulatory gap that will likely ensure the country remains competitive within the emerging digital asset landscape, and will be the catalyst for innovation within the stablecoin market.
Featured image from Pexels, chart from TradingView