Have you ever invested in a stablecoin? Per Investopedia, stablecoins are cryptocurrencies whose value is pegged to another currency, financial instrument, or even a commodity. Tether (USDT), for example, provides investors access to a stablecoin backed by U.S. dollar reserves and “denominated at parity to the dollar.” That’s helped it rise to the top five cryptocurrencies by market cap as of June this year. Now, increasing use of stablecoins in the broader Western financial system may be priming broader use of said coins, as well as potential investment and expansion for related payment systems.
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Stablecoins Loom Over Future Payment Systems
New research from CoinShares underlines stablecoins’ growing appeal in the U.S. For one, CoinShares digital asset analyst Matthew Kimmell wrote, stablecoins have offered a “stepwise improvement” for U.S. dollars.
“Akin to early paper money receiving an upgrade in their ability to be transferred at higher speeds and across long distances with the invention of the telegraph, and then again with the internet, the plumbing of crypto systems is similarly emerging as a competitive offering to hold, send, and receive dollars,” Kimmell wrote.
“It is a stepwise improvement — in custody, transparency, payment cost and speed — that is inviting stablecoin usage to take hold in a broader sphere of usage,” he added.
New technology like Bridge, meanwhile, appears poised to help move crypto assets across various wallets and networks. That, Kimmell noted, helps explain why a major payments player like Stripe acquired Bridge in October.
Other firms like Visa (V), PayPal (PYPL), and Robinhood (HOOD) are all looking at crypto payment services, he adds. That space in the crypto network still needs serving, with real opportunities for those firms. Looking ahead, should that payments infrastructure arrive, stablecoins could play a big part of future financial flows.
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