Stablecoins are quietly becoming even more important to the crypto industry

AFP via Getty Images

There has been no shortage of headlines and talk about crypto assets recently, generating both positive and negative price momentum for the sector. As the Mt. Gox and German government liquidations proceeded in a seemingly orderly fashion, these actions put significant pressure on the price of Bitcoin, which briefly dipped below $58,000. That said, as these liquidations continued, price support at these levels held, indicating that even after an initial bout of fear caused by this selloff, investors remain confident in the medium- to long-term price outlook. JP Morganfor example, expects the sell-off and price pressure to be completed by the end of July, followed by a market recovery in August. Crypto predictions are notoriously difficult to get right, but they serve as an example of market sentiment.

Additionally, cryptocurrency continues to play an increasingly prominent role in political conversations, with the Biden Administration holding high-level meetings with cryptocurrency industry leaders and advocates in an attempt to shore up support in what has emerged as an opportunity to sway undecided voters. On the other side of the aisle, former President Trump announced a 30-minute presentation on Bitcoin 2024one of the largest and most significant crypto conferences in the United States. With all of this going on, it would be reasonable for investors and advocates to focus on these items, but that would ignore several important points.

Let’s take a look at some headlines and stories that cryptocurrency investors may have overlooked.

The SEC continues to vacillate

While Binance and CZ have each pleaded guilty to criminal activity, paid fines in the billions, and are facing significant legal challenges going forward, the SEC has recently suffered a legal setback over additional efforts connected to Binance. The SEC recently concluded its investigation into Paxos – the issuer of the Binance USD stablecoin – without recommending any enforcement action. The lack of enforcement action alone should be seen as celebratory news for Paxos, but it could also have broader implications for cryptocurrency regulation.

As the SEC continues to face mounting resistance and legal challenges to its ongoing efforts to classify the entire cryptocurrency sector as securities, stablecoins are poised to benefit. Especially since these crypto assets — nearly all of which are backed 1:1 by USD — were purposefully built and intended to be used as a medium of exchange rather than an investment vehicle, these setbacks could provide some much-needed breathing room for more objective conversations on the topic.

PayPal Stablecoin Continues to Grow

After a somewhat low-key launch that was almost immediately marred by an SEC investigation into the stablecoin itself, PayPal’s stablecoin efforts have continued. A recent integration with the Solana blockchain has led to a surge in the token’s market cap, which recently surpassed 500 million dollars. Data from DeFillama shows that the total supply across the existing Ethereum blockchain is approximately $399 million, or 77% of the total supply with the remaining amount in Solana. Furthermore, the supply increased rapidly — by 58% during the first week of integration — on Solana, while it fell by 6% on Ethereum.

Furthermore, the integration with Solana has also led to substantial growth in DeFi platforms and the DeFi ecosystem at large, with availability on both the Jupiter and Orca DEX, as well as inclusion on the Kamino Finance lending and liquidity protocol. Given the household name recognition that PYUSD has, coupled with the growth resulting from the Solana integration, it seems that PayPal and PYUSD appear poised for continued growth and utilization.

State-backed stablecoins are coming fast

While the federal government continues to swing back and forth regarding cryptocurrency regulation and standard-setting, individual states continue to lead the way. Building on previous efforts, the state of Wyoming has announced its intention to launch a state-backed stablecoin in 2022. After dealing with some resistance and legislative difficulties, an announcement was made in May 2024 that the minting of the state-backed token was underway. The token, which is backed on a 1:1 basis by the US dollar, is scheduled to begin circulation in late 2024 and will be issued under the ticker WYST.

The commission was bolstered by the passage of Senate Enrolled Act 85: Wyoming Stable Token Act, which granted the Stablecoin Commission the right to issue the first state-backed stablecoin in the U.S. WYST is set to debut and be hosted on the Ethereum blockchain, and will only be traded/available on centralized exchanges like Coinbase. While it is too early to tell how successful or widespread WYST will be, the fact that an individual state has managed to come this far so quickly is indicative of how strong the appeal of stablecoins remains.

Stablecoins are here to stay, playing a critical role for TradFi, centralized exchanges, DEXs, and investors of all sizes looking to deploy capital into crypto. Despite the media hype, investors and advocates should not lose track of this critically important crypto asset class.

Fuente