In an unpredictable world of crypto, Stablecoin has emerged as a relatively secure and stable medium of exchange. Satblecoin’s growth has been remarkable in recent years. Stablecoin can take center stage when it comes to facilitating reliable and efficient transactions in the Decentralized Finance and Blockchain based networks. However, alongside potential growth in Stablecoin, several challenges are attached.
Classification Of Stablecoins
Stablecoin serves as an important asset in the crypto network. It is known as the tokenized version of cash, which creates a way over between fiat money and digital assets backed by blockchain. Moreover, stablecoins’ liquidity is higher than other digital currencies when it comes to lending and trading. You must wonder, how?
Experts classify Stablecoin into main categories that depend on the mechanism used to sustain the peg. However, let’s quickly over go few of those:
- Fiat-backed Stablecoins: These are backed by reserves of fiat currency, such as the U.S. dollar, held by a trusted custodian. Few examples of fiat-backed stablecoins are USD Coin (USDC), Tether (USDT), and Binance USD (BUSD).
- Crypto-backed stablecoins: These stablecoins are backed by reserves of other cryptocurrencies, such as Bitcoin or Ethereum. Few examples of crypto-backed stablecoins are Dai (DAI), sUSD (SUSD), and BitUSD (BITUSD).
- Commodity-backed stablecoins: These are backed by reserves of physical commodities, such as gold, silver, or oil, held by a trusted custodian. Few examples of commodity-backed stablecoins are Paxos Gold (PAXG), Digix Gold (DGX), and Tether Gold (XAUT).
- Algorithm-backed Stablecoins: These stablecoins are not backed by any reserves. However, they rely on algorithms and smart contracts to manage the supply and demand of coins and to keep its peg. Ampleforth (AMPL), Basis Cash (BAC), and Terra (LUNA) are a few of the examples.
Stablecoin Market Growth In March 2024
In recent news, the Stablecoin market is growing for the first time since the last 18 months. Its growth is directly affecting cryptocurrencies, however in a positive way. According to Coindesk, Stablecoin’s growth is highlighted by Tether USDT touching an all time high market cap of $89 billion.
As stated by Binance, the market capitalization of USDe, which is a stablecoin issued by Ethena Labs, has surpassed $900 million, reaching $902.78 million as on 12 March 2024. USDe is an Ethereum-based stablecoin backed by derivatives. To create USDe, users can use US dollars, ETH, or liquidity collateral tokens as collateral.
The current market cap of Stablecoin is an achievement that shows the wider acceptance and use of Stablecoins. With more users turning to stablecoins for its stability and ease of use, we can expect continued growth in the market cap of USDe and other similar stablecoins.
Top Stablecoin Tokens By Market Capitalization
As we are discussing the growth of Stablecoins and its wide usage, let me present to you the current top Stablecoin tokens in the market cap category. Here is the graph sourced by Binance.
Challenges In Stablecoin Market 2024
As the market grows and expands, Stablecoin can face certain challenges. The main challenges are the international conventional payment system and Stablecoin encounter with the regulatory system. However, with these challenges are attached opportunities for the government to learn about digital payments and their long run advantages.
In addition to these challenges, JP Morgan’s statement from the past month is still a concern for many. JP Morgan said, “Growing concentration in USDT over the last two years has solidified its role as the leading stablecoin, but a “lack of regulatory compliance and transparency” by Tether is an increasing risk for the market.” The statement still hovers the market despite Stablecoin’s all time high market capitalization of $900 million.
Stablecoin’s Expansion In Japanese Market
The cryptocurrency network starts trends (upward or downward) in the US market, however it lasts in the international market. The Japanese market is no exception. Though the concept is still alien for Japanese LLCs and DAOs, investors seem to have keen interest in Stablecoins. Surprisingly, the regulatory authorities are open to make amendments for Stablecoin’s common use.
Asia Web3 Alliance Japan’s Role In Stablecoin Market
Asia Web3 Alliance Japan (AWAJ) is an Incorporated Association under Japanese regulation. It is the first association in the blockchain space governed by International board members. Our primary agenda is to support blockchain space and empower International entities in Japan and around the world.
Japan has specific regulations, and often, International voices struggle to reach decision-makers. By establishing the Asia Web3 Alliance Japan, with a board of International members, the platform aims to provide a channel for international companies to share their feedback, request reviews, and have a stronger influence on government and financial services agencies in Japan. This platform seeks to bring more opportunities by overcoming the gap in the Japanese blockchain ecosystem.
Stablecoin Subcommittee
Asia Web3 Alliance Japan (AWAJ) has also established a Stablecoin Subcommittee to promote stablecoins and DeFi, as a potential digital payment method in everyday transactions in Asia and Japan for both LLCs and DAOs. AWAJ aims to take a collaborative stance, offering opportunities for companies, investors, startups, financial institutions, and related individuals. The subcommittee focuses on addressing legal frameworks for a stablecoin, fostering innovation and collaboration, and advocating for its adoption and use case.
AWAJ X Stabelcoin Standard
To attain its goals, recently Asia Web3 Alliance joined hands with Stablecoin Standard to make Stablecoin broader acceptance in Japan. The Stablecoin Standard came into existence in 2022. The company aims to bring together the stablecoin industry as a whole to educate, inform and advance the industry through shared perspectives.
Over the past 2 years, Stablecoin market has undergone downward trends until most recent growth by all time high market capitalization. Indeed, there are certain regulatory challenges to consider as indicated by JP Morgan in February. However, Stablecoin is the most secure, transparent and liquidated digital currency until now.
Asia Web3 Alliance Japan aims to overcome challenges attached to Stablecoin in the Japanese regulatory system. The market has great potential to accept Stablecoin as a mode of payment in De-Fi. It needs only regulatory push to make it sustainable in the Japanese market.
