Anyone who holds a crypto business account in the UK may find there are great advantages to making and accepting payments in digital currencies, enabling you to cash in your digital assets and allowing your customers to do likewise.
In the latter instance, this may make them more likely to trade with you, as they may find that it is convenient to liquidate these assets when fiat money supplies may be limited.
The situation may be aided further through a Volta account that enables you to trade freely in crypto, taking advantage of new opportunities as the market fluctuates and offering you greater ease to make crypto transactions around the globe.
For anyone taking their tentative first steps into the crypto world, the names of prominent forms of crypto like Bitcoin and Ethereum may already be familiar, but some may wonder just what stablecoins are.
What Is The Definition Of A Stablecoin?
The definition of stablecoins is as follows:
· Like any cryptocurrency, they can be created electronically and do not have to be created or issued by a bank, which makes their value less volatile (hence the ‘stable’ part)
· Unlike cryptocurrency, these are digital assets that are tied to a tangible currency, such as pounds or dollars
· They are used for buying or selling cryptoassets
· They can also be used for cross-border payments
Their role in the buying and selling of cryptoassets is of particular importance for crypto traders and investors.
Reflecting on this, the Wall Street Journal (WSJ) recently described stablecoins as “the entry ramp to the Cryptoverse’s wider ambitions”, noting how important their role is in acting as the “common coin” of the digital realm, playing a key role in the flow of digital assets.
What Would Fewer Stablecoins Mean For Crypto Markets?
This is important, the paper noted, because there has been some consternation recently at a small drop in the value of US Dollar-backed stablecoins, albeit only two per cent.
That may not sound like a lot, but it is still significant in the context of a large growth in stablecoin numbers after the passing of the Genius act in the US last year, which was designed to regulate the market more closely.
While the headlines have recently been dominated by the plunge in Bitcoin values and its wider impact on the crypto market, the WSJ declared that “the real deep freeze would be if there were an extended drop in the value of stablecoins in circulation”.
This, it explained, is because stablecoins can simply be exchanged for the fiat currency backing them, so if there was a major drop in the number being held, that would indicate that investors were cashing out and, in doing so, turning their backs on the crypto markets.
Fortunately, as the WSJ asserts, this is not likely to happen, not least as it observed signs, backed by expert opinions, that many crypto investors have been pursuing new opportunities as they seek to buy low in anticipation of future increases in value.
Indeed, a cyclical view of the market would encourage just this thinking, which means stablecoins will remain important.
However, this is not the only reason to expect stablecoins to thrive. While there has been a small dip in dollar-backed stablecoin holdings, countries across the world are increasingly keen to promote them.
Why Might The EU Launch A Euro-backed Stablecoin?
In Europe, the head of Germany’s Bundesbank, Joachim Nagel, has publicly called for the establishment of Euro-backed stablecoins for cross-border currency transactions.
As Blockonomi reports, he argued that this is a vital step when there are doubts about transatlantic trust and cooperation.
Mr Nagel said the potential breakdown of the rules-based order, as rifts grow in the relationship between the US and Europe makes this necessary, enabling European sovereignty to be protected as stablecoins would no longer be under the control of American providers.
If the EU has one motive for issuing stablecoins, the biggest economies in Africa have their own.
What Is The Appeal Of Stablecoins In African Countries?
According to the Stablecoin Utility Report, conducted by YouGov and focused on stablecoin holdings in 15 countries, South Africa and Nigeria are leading the way in adoption across the continent.
The main motivation for this is that in poorer countries, stablecoins are among the fastest and most secure ways of making money transfers.
However, while Europe may be looking to develop its own Euro-backed stablecoins, the dominant stablecoins in Africa, USDC and Tether, are dollar-backed. This may create concerns about creeping economic dollarisation.
Whatever the fiat currencies or other assets backing stablecoins, they have a major role to play in crypto markets – and, therefore, in making it worthwhile for your firm to have a crypto account and accept digital asset payments.
Despite the slight wobble in US holdings amid the fallout from the Bitcoin crash, it seems their role is set to grow over the coming years.