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Stablecoins: The Future of Cryptocurrency in Payments
The Rise of Stablecoins
Cryptocurrency may indeed find its most effective use in payments, but not necessarily with Bitcoin. According to Bernstein, stablecoins could be the game-changing application for cryptocurrency, potentially creating a nearly $3 trillion market in the next five years. Stablecoins, which are cryptocurrencies with values pegged to an underlying asset such as a fiat currency or commodities, are seen as a more stable alternative to volatile cryptocurrencies like Bitcoin.
Co-branded Stablecoins: The New Trend
Analyst Gautam Chhugani predicts that major global financial and consumer platforms will issue co-branded stablecoins to facilitate value exchange on their platforms. The business model of stablecoins is considered highly profitable due to the float income generated from the treasury and money market holdings of stablecoin issuers. Chhugani expects these revenues to be shared with consumer partners, making co-branded stablecoins an attractive proposition for new platforms.
Stablecoins in Circulation
Currently, there are approximately $125 billion worth of stablecoins in circulation, with more than $6 trillion settled annually on public blockchains such as Ethereum. They are primarily used by the crypto industry and early adopters for various purposes, including business-to-business settlements, exchange transfers, trading pair settlements, and person-to-person transfers.
Market Dominance of Offshore Players
Despite the sharp drop in the stablecoin market this year, offshore players like Tether have managed to buck the trend, growing its market capitalization by 26.5%. Tether hit an all-time high of $83.8 billion in July and now accounts for 68.5% of the overall stablecoin market.
Legislative Developments and Industry Response
The crypto market is currently awaiting a vote in Congress on a key stablecoin bill, which has advanced to the House along with three other crypto bills. In anticipation of this decision, payments giant PayPal launched its own stablecoin. While details on how PayPal's customers and merchants would utilize stablecoins within its ecosystem are scant, Bernstein believes this move places PayPal at the forefront of the future of crypto and payments.
This developing story has the potential to significantly reshape the landscape of cryptocurrency and digital payments, making it crucial for businesses and investors to stay informed.
Implications for New Businesses
The rise of stablecoins and their potential to revolutionize the cryptocurrency market has significant implications for new businesses, particularly those in the financial and tech sectors.
Adapting to the Stablecoin Trend
The shift towards stablecoins presents an opportunity for new businesses to adapt their strategies and offerings. Businesses can explore the creation of co-branded stablecoins or integrate stablecoin payment options into their platforms, potentially tapping into a market projected to be worth nearly $3 trillion in the next five years.
Understanding Regulatory Landscape
With the crypto market awaiting legislative decisions on stablecoin bills, new businesses must stay informed about regulatory developments. Understanding the legal landscape is crucial for businesses to navigate potential risks and ensure compliance.
Partnership Opportunities
The trend of co-branded stablecoins also opens up partnership opportunities. New businesses can collaborate with financial platforms or stablecoin issuers to create co-branded stablecoins, potentially gaining access to new customer bases and revenue streams.
In conclusion, the rise of stablecoins could significantly impact new businesses. By staying informed and adapting to these changes, businesses can seize the opportunities presented by this emerging trend in the cryptocurrency market.
Article First Published at: https://www.cnbc.com/2023/08/09/bernstein-says-crypto-may-finally-have-its-killer-application.html
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