The Block Stablecoin Report: $1 Trillion Trading Volume Is Just the Beginning
On March 10, The Block Research published a stablecoin report entitled "Bridging the Network Gap between Traditional Currency and Digital Value". The nearly 140-page report describes what stablecoins are, stablecoin market data, stablecoin regulation, stablecoin development prospects, etc. Beep News selected the chapter "Prospects for the Development of Stablecoins" and compiled it for readers.
The total issuance of stablecoins reached nearly 40 billion U.S. dollars, which was almost 0 two years ago. In January, the transaction volume of stablecoins exceeded 300 billion U.S. dollars, an increase of more than 60% compared with the ATH in 2020.
In 2020, 110 million stablecoin transactions were conducted on the public chain network, and the stablecoin transaction volume exceeded 1 trillion US dollars.
In 2020, PayPal conducted 15.4 billion transactions, with a total payment volume of $936 billion.
While this is an unequal comparison, the differences in use cases are evident when looking at the average payment size. The average payout size for PayPal is about $60, and for stablecoins it’s over $9,000.
The explosion of stablecoins in 2020 is driven by a variety of factors, including the increased demand for using stablecoins as collateral for derivatives, the continued consolidation of stablecoins’ dominance in spot trading pairs, the boom in DeFi, and more.
However, as previously discussed, the vast majority of stablecoin applications are still related to transactions and cryptocurrency speculation. This is why USDT, which is mainly used for transactions, accounts for more than 76% of the total circulation.
The strong product-market adaptability of stablecoins in cryptocurrency transactions enables them to seamlessly connect with other complementary fields. For example, in the field of foreign exchange, there will be unnecessary friction when exchanging fiat currencies, and stablecoins will reduce the friction, and may eventually become a method for non-cryptocurrency users to remit and pay.
So far, influential stablecoins have been issued by cryptocurrency-centric businesses and projects. In 2021, as more traditional companies are expected to launch their own stablecoins, the current status quo will change dramatically.
Japanese internet giant GMO Internet has announced the launch of a Japanese yen-based stablecoin, GYEN, and a U.S. dollar-based stablecoin, ZUSD.
As Diem moves towards launching a single-currency stablecoin and multi-currency Dein Coin, the trend of traditional enterprises launching stablecoins will become more and more obvious.
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Japanese internet giant GMO Internet
GMO Internet's business involves cryptocurrency services such as digital asset transactions and mining, as well as services such as foreign exchange transactions, online payments, and remittances. Launching its own set of stablecoins is a match made in heaven.
GMO Internet established the GMO-Z.com Trust Company (GMO Trust) in New York, and launched the yen-based stablecoin GYEN and the dollar-based stablecoin ZUSD.
GMO Trust was established under the New York State Banking Law and is regulated by the New York Department of Financial Services (NYDFS). The New York Department of Financial Services also currently regulates stablecoins such as PAX, BUSD, and HUSD. This means that GMO Trust meets the most stringent requirements of Commonwealth Bank regulation. GMO Trust issues a certificate issued by the accounting firm Friedman LLP every month to facilitate the inspection and confirmation of the basic reserve of legal currency.
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American online payment service provider PayPal
PayPal announced at the end of October last year that it supports buying, selling and holding cryptocurrencies. In the first half of this year, its product Venmo will also support buying, selling and holding cryptocurrencies. PayPal also plans to roll out "cryptocurrency settlement" for its 26 million merchants. PayPal joins many financial service providers and fintech companies to accelerate the realization of the desire to expand the digital asset landscape.
PayPal clearly recognizes interest in CBDC and stablecoins from central banks, policy makers, payment giants (Visa and Mastercard). Considering that since the end of the third quarter of last year, the trading volume of stablecoins on the chain has exceeded US$600 billion, which is close to PayPal's annual transaction volume in 2019 ($71.2 million). PayPal may expand to the field of stablecoins in the future and support trading /Holding cryptocurrencies is likely the first phase of this long-term plan.
PayPal is the first payment giant to withdraw after Libra encountered opposition, but PayPal has always had ambitions for stablecoins. In a press release announcing its support for cryptocurrencies, PayPal said: "Advanced technology platforms" (i.e., blockchain and distributed ledger technology) increase the likelihood that digital currencies will become mainstream. It also mentioned that one in 10 central banks expects to issue their own digital currency within the next three years.
PayPal CEO Shulman said: "The trend of currency digitization is irreversible. This transformation has brought advantages in several aspects: improving financial inclusion and accessibility, improving the efficiency, speed and responsiveness of the payment system, and improving The ability of the government to disburse funds quickly to citizens, etc.”
He also said: "We are eager to work with central banks and regulators around the world to offer our support and make a meaningful contribution to shaping the role digital currencies will play in the future of global finance and commerce."
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Diem (formerly Libra)
In 2019, Facebook launched the stable currency project Libra and published a white paper. Most government officials believe that it may pose a threat to "monetary sovereignty".
This prompted it to modify the network concept and design, and the mechanism changed from a single Diem currency to a multi-currency stable currency. The multi-currency Diem stablecoin includes multiple stablecoins based on a single currency.
Diem hopes that the CBDC will eventually be directly integrated with the Diem network. The CBDC will replace the stable currency based on a single currency and reduce credit and custody risks.
Diem was originally planned to launch in the fourth quarter of last year, but again encountered regulatory obstacles. In early October, the G7 (Group of Seven) opposed the launch of the Diem stablecoin unless the network has been "properly regulated." Although the finance ministers of various countries agree that Diem stable currency can improve access to global financial services, while improving efficiency and reducing costs, they also believe that Diem should be given appropriate supervision to prevent it from undermining financial stability, consumer protection, privacy, and taxation or cybersecurity.
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next milestone
Stablecoins have proven to have a strong market for cryptocurrency enthusiasts and speculators, and stakeholders and policymakers in the public and private sectors have taken notice of stablecoins. The developments we see today may have an impact on the course of the next decade.
As the report states, stablecoins have become a formidable force in the rapidly changing cryptocurrency ecosystem. The next stage of stablecoin development will depend on the development of use cases outside the niche market of the digital asset industry, which may be a very important stage.
Reports have already indicated that with the advent of Web3, stablecoins will have the opportunity to expand beyond cryptocurrencies. However, until regulatory friction is removed, stablecoin growth may be gradual. It will take time for regulatory friction to be eliminated. As we have seen in the past, the debate on stablecoins is staged in public, with both positive and negative voices participating, and it is difficult to predict both the outcome and the duration.
But barring serious interventions, once the globalization framework is established, we believe the $1 trillion transaction volume of stablecoins is only the beginning, which will help bridge the network gap between traditional currencies and digital value ecosystems.
