The adoption of stablecoins by consumers in the US is encountering a deceleration in 2024, despite the uptick in Bitcoin activity following the rollout of spot Bitcoin exchange-traded funds.
The illustration below depicts a drop in transactions via US-regulated platforms over the past year. This decline can be linked to the escalating regulatory challenges and issues surrounding the adoption of US-based stablecoins.
This trend suggests that stablecoins from emerging markets outside the US are experiencing a surge in utilization. As stablecoins gain traction worldwide, they are increasingly being used to preserve value and facilitate low-cost transactions across the globe.
Share of stablecoin inflows to exchanges regulated in the United States versus those not regulated in the US. Source: Chainalysis
Global Demand for US Dollar-Backed Assets
As nations strive for a more dependable asset base typically represented by the dollar, stablecoins are poised to enhance global financial inclusivity, particularly in regions where stable currencies are lacking. The increasing demand for trustworthy and well-maintained assets will significantly drive the adoption of stablecoins.
Currently, the market capitalization of cryptocurrencies stands at $2.26 trillion. Chart: TradingView.com
At the conclusion of 2022, it was noted that approximately $1 trillion in US dollars was located abroad, which is roughly half of the entire US dollar supply. This highlights the growing trend of stablecoins substituting cash in markets where local currencies are often unstable.
Image: Built In
The findings correspond with the remarks of Paolo Ardoino, the CEO of Tether, who recently indicated that the demand for stablecoins primarily originates from developing nations like Argentina, Turkey, and Vietnam. In these areas, citizens utilize stablecoins as a safeguard against inflation and currency deterioration, increasingly employing them as financial tools for daily transactions and savings.
Stablecoins: Regulatory Challenges and the US Position
The absence of a suitable regulatory framework for digital assets places the United States at a competitive disadvantage; financial centers in Europe and the UAE are attracting stablecoin initiatives due to their much more accommodating regulatory environments. As noted by Chainalysis, companies like Circle have warned that the lack of a regulatory framework for stablecoins in the US could pose risks to American interests.
More nations are stepping up to establish clear guidelines that foster the use of stablecoins, and the US is also responding to this call; Chainalysis believes that the regulatory gap will likely ensure that the country remains competitive in the evolving digital asset landscape, potentially serving as a catalyst for innovation in the stablecoin sector.
Featured image from Pexels, chart from TradingView
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