2021 has been a very productive year for the cryptocurrency market. In terms of awareness and popularity, cryptocurrencies, which enable users from all walks to enter the sector, continue to receive investments day by day.
Although it seems that price movements have changed in an unusual way, cryptocurrencies have seen a serious increase. By November, the market value of cryptocurrencies reached an all-time high. 3 trillion dollars reached.
The market, which is currently volatile due to a lack of structural regulation, has also caused cryptocurrencies to be seen as a daunting industry for new investors.
There is also a form of crypto money that works differently from the transactions made by cryptocurrencies in general. This asset, called stablecoin, allows users to protect their assets from high volatility. Stablecoins are also recognized as the industry’s fiat currency, with the growing popularity of stablecoins.
So What Is This Stablecoin?
Stablecoins are a type of cryptocurrency that is stable in value to an asset such as the US Dollar.
Most of the “stablecoins” currently in the cryptocurrency market rely on the US dollar as the reference asset. As a result, the price of stablecoins fluctuates very little, unlike high-profile cryptocurrencies like Bitcoin and Ethereum, which are prone to sudden price changes.
The first stablecoin was Tether, which was developed in 2014 and is modeled after by many other stablecoins. Users get one token for every dollar they deposit. Theoretically, these “tokens” can then be converted back to the original currency at any time at a one-to-one exchange rate. Tether (USDT) and USD Coin (USDC) are the most preferred “stablecoins” among investors in the cryptocurrency market.
According to CoinMarketCap data as of December 31, 2021, Tether has a market cap of approximately $78.35 billion. The market value of USD Coin is at the level of 42.4 billion dollars.
How can stablecoins be used in the future?
Stablecoins are known as a kind of private money. With the lower costs that come with the use of blockchain technology and the lowering of financial service fees, the stablecoin allows for the expansion of the private and public sector’s role in providing money. Stablecoins, which are generally used for special purposes, have also attracted the attention of states due to their usage areas and have enabled them to focus on this area.
Some countries have even begun to turn to CBDCs, a new stablevoin they have developed. CBDCs designed for use in public and private areas are planned to be released under government control.
There are countries that put the plans made in this context into operation. For example, the Bahamas has even introduced a CBDC it calls “Sand Dollar”. Now, CBDCs, which are started to work by big states, have entered the radar of countries with global power such as the USA. Finally, the Biden administration wants to control stablecoins with bank-like regulation. In fact, what is wanted to be done here is conveyed as making major changes in the functioning of the current money and making its usage area more useful.
One of the key benefits of stablecoins as a future-proof option will be their capacity to act as a variation of a narrow bank, holding 100% reserves in high-quality liquid assets against cryptocurrency liabilities and mitigating the risk to those who invest in them.
What Do States Think About This?
Regulators of countries want to move forward with this new initiative and examine stablecoins like CBDC as the banks of the future.
There seems to be a consensus in the cryptocurrency world itself for now that the stablecoin landscape should be viewed differently from regulations that are at least on par with today’s banking regulations. Making a statement on the subject, Steve Parker, CEO of crypto money wallet application Crypterium, made the following statements:
“Anyone who thinks regulators will allow a new unregulated currency to take a leading role in economic finance doesn’t know how financial regulation works. There is a huge battle to take control of cryptocurrency regulations. But once this is resolved, stablecoins and their creators will be tightly regulated.”
In addition, another name that made a statement was Sir Jon Cunliffe, vice-president of the Bank of England. Cunliffe cites comments that the continued growth and use of digital currencies could lead to a financial meltdown as proof that regulation is inevitable.
Early Precaution is Desired to Take in Cryptocurrency
Regulators are also working on the cryptocurrency field, trying to prevent the mistakes of the past from being repeated. Global adoption of cryptocurrencies has skyrocketed over the past few years. Cryptocurrency applications in general make it difficult to implement existing regulations and frameworks. This is why any hasty regulation is thought to make the cryptocurrency market more dangerous.
The first of the necessary steps here can be shown as the creation of a comprehensive and effective regulatory system. In this context, the EU has started to introduce stricter financial regulations and many member countries have now started to regulate their crypto money assets individually.
As a result, there is a need for effective regulation, legislation and solutions that can be applied specifically to digital assets and help suppress financial crimes.
Here it comes into play regulator technology platform Sekuritance It provides various suggestions and solutions to some deficiencies in the sector. With its security services, Sekuritance continues to work to facilitate the bringing of illegal transactions to justice and to facilitate dialogue between regulators and the public.
Sekuritance’s RegTech Solutions
Sekuritancestates that with RegTech solutions, it can assist the industry by making sure that all aspects of KYC are met. In the statement made by the platform, Sekuritance’s RegTech product package Sekur.Transacthelps exchanges identify who their customers are. another product Sekur.Traceinforms government agencies, banks, financial institutions and cybercrime/financial crime authorities around the world to help determine if a particular cryptocurrency transaction or cryptocurrency wallet is involved in any dangerous fraud or darknet activity. Finally Sekur.MFA and allows merchants to verify and process 3DS checks before receiving payment.
As a result, the platform says that with its RegTech suite, it can meet the needs of all private players and innovators in the cryptocurrency space, small investors who enable daily use of cryptocurrencies, and government agencies and regulators tasked with protecting consumers.
What can be done?
In the near future, the United States in particular wants to design a special-purpose statute for stablecoin issuers that would put them in the same category as banks. In fact, the current focus on stablecoins can be seen as an indication of their potential rather than their risks. However, to get the most out of this space, the arrangement will likely need to be done without damage.
Positive steps to be taken will help develop the stablecoin usage area. However, the important point in development will be directly proportional to the right steps to be taken.
Generally speaking, regulations in the cryptocurrency space, particularly stablecoins, will likely define whether and when the technology will deliver its full potential. Also, setting a standard in this area can be incredibly useful in promoting the right solutions while keeping the private sector in check.