These digital assets based on blockchain technology are cryptocurrencies tied to the value of a particular fiat currency, such as the dollar.
The cryptocurrencies are modifying the way saver. El crypt world is ceasing to be only for connoisseurs, and stablecoin they play a fundamental role in its development. But what are stablecoins specifically?
Stablecoins are cryptocurrencies that can eventually be converted to fiat currency, since their price is “anchored” to the value of an asset or a fiat currency, such as the dollar. They originated to reduce the volatility of the value for active crypto exchange.
Some of the most prominent and well-known, with the highest market capitalization, are Tether (USDT), USD Coin (USDC) y DAI (DAI). To delve into the operation and differences, you enter one and the other, in an interview with Cointelegraph in Spanish, Julian Garcia, Data science de Capital amount, explained some points of these cryptocurrencies.
“Tether (USDT) is a stablecoin issued by a Hong Kong-based company called Tether Limited, which supports its issuance through cash, bank deposits, treasury bills, guaranteed loans, commercial papers, certificates of deposit, reverse repurchase notes, corporate bonds, funds and precious metals, among others “, Garcia detailed.
“The main advantage of Tether is that it is the most liquid currency in the market. So that large volume operations can be carried out without significantly affecting the price “added.
However, as a main disadvantage, he explained that Tether Limited is a private company that does not have a regulatory framework or an audit that can certify the complete security of operations with its native token.
Tether (USDT) is a stablecoin issued by a Hong Kong-based company called Tether Limited
USD Coin (USDC)
For its part, according to the Data Scientist, “USD Coin (USDC) is a stablecoin issued by companies Circle Y Coinbase, registered with the endorsement of the Financial Crimes Enforcement Network (FinCEN) of the Department of United States Treasury. In addition, they have a New York Bit License, and an endorsement by the Financial Conduct Authority of the United Kingdom “.
According to Garcia, “all units in circulation of this cryptocurrency are backed by a dollar held in reserve, in a combination of cash and short-term US Treasuries, with periodic audits. For this reason, the main advantages of USDC are the certainty regarding the reserves that support its issuance and the fulfillment of the regulations of the different organisms “.
USD Coin (USDC) is the second most popular stablecoin in the crypto market, which is jointly issued by the firms Coinbase and Circle
While “DAI (DAI) is a stablecoin whose issuance and development is managed by the protocol Maker and the decentralized autonomous organization of Maker DAO over the network of Ethereum. This means that no institution is required to issue DAI. Anyone can issue it by locking other cryptocurrencies in the protocol’s smart contract vaults. Its endorsement underlies the value of cryptocurrencies that lock on issuance“.
For García, the main advantage of DAI is that it is not a cryptocurrency issued by an institution. This is because the Management of reserves is managed in a decentralized way.
DAI (DAI) is a stablecoin whose issuance and development is managed by the Maker protocol and the decentralized organization Maker DAO on the Ethereum network
By way of conclusion, the data science of Capital amount He also highlighted that stablecoins have their own advantages and that the choice of one over another depends on the need or priority of each user. The final decision is up to each one.
“For example, the liquidity in the case of USDT, the certainty in the support of the issue and the regulatory framework in the case of USDC or the decentralization of the issue in the case of DAI,” he concluded.
Stablecoin regulation grows
The proposal explains that stablecoins, because they are digital currencies linked to a fiat currency such as the euro or the dollar, they have less volatility than the Bitcoin (BTC).
Given its abrupt growth and its evident influence on the financial system, the global regulators began to take the first steps, with the aim of regulating stablecoins at the level that applies to payment systems or clearing houses for financial assets.
The objective is not to establish a new regulatory framework for stable currencies, but rather to provide more clarity on their systemic importance and to provide the tools to adjust them to the principles created in 2012 that regulate the infrastructure of the financial system of a systemic nature. .
For the president of IOSCO, Ashley Alder, “This report represents a significant advance in the understanding of stablecoins for the financial system and provides clear and practical guidance on the standards they need to meet to maintain their integrity.”
Federal Reserve Chairman Jerome Powell seeks to regulate stablecoins
For his part, the chairman of the Federal Reserve, Jerome Powell, was expressed around stablecoins, and their lack of regulation. “Cryptocurrencies have tried and failed to become a viable payment method, apart from their use by privacy fanatics,” he slipped at one point.
In addition, I come to emphasize that these mechanisms have the same structural vulnerabilities in terms of liquidity, encourage tax evasion and maturities as the main monetary funds that operate internationally, but with less transparency.
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They are worth like the dollar, but they work like bitcoin: what are the differences between Tether, USD Coin and DAI?