{"id":229773,"date":"2021-04-18T16:15:00","date_gmt":"2021-04-18T13:15:00","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/a-nightmare-on-stable-street-centralized-stablecoins-may-be-doomed\/"},"modified":"2021-04-18T16:15:00","modified_gmt":"2021-04-18T13:15:00","slug":"a-nightmare-on-stable-street-centralized-stablecoins-may-be-doomed","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/a-nightmare-on-stable-street-centralized-stablecoins-may-be-doomed\/","title":{"rendered":"# A nightmare on Stable Street: Centralized stablecoins may be doomed"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_84 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a2e43e52f28d\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a2e43e52f28d\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/a-nightmare-on-stable-street-centralized-stablecoins-may-be-doomed\/#CBDCs_and_stablecoins\" >CBDCs and stablecoins<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/a-nightmare-on-stable-street-centralized-stablecoins-may-be-doomed\/#Are_decentralized_stablecoins_set_to_replace_the_old_ones\" >Are decentralized stablecoins set to replace the old ones?<\/a><\/li><\/ul><\/nav><\/div>\n<p>&#8220;<strong># A nightmare on Stable Street: Centralized stablecoins may be doomed <\/strong>&#8221;<br \/>\n<img decoding=\"async\" src=\"https:\/\/images.cointelegraph.com\/images\/840_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjEtMDQvNDY5ZTg0MjYtOThlMy00M2Y1LWE5ZjMtZWQ3ZmVkYjVhMTMxLmpwZw==.jpg\" \/><\/p>\n<div class=\"post-content\" data-v-5a136f3a>Over the last couple of years, we have seen a lot of interest from central banks and governments in the stablecoin market. The reason behind it lies in the development of central bank digital currencies, or CBDCs.<\/p>\n<p>The idea of issuing a digital alternative to cash is a great motivator for central banks. It allows them to gain more control over the transition and processing of cashless transactions, which are currently overseen indirectly through private payment processors and banks.<\/p>\n<p><strong><em>Related: <\/em><\/strong><strong><em>Did CBDCs affect the crypto space in 2020, and what\u2019s next in 2021? Experts answer<\/em><\/strong><\/p>\n<p>There have been a number of pilot CBDC projects and initiatives already launched by several central banks, and more are about to come. It is important to note, however, that CBDC has nothing to do with cryptocurrency or known stablecoins in the crypto community \u2014 they are not intended to be heavily used in trading; some of them will not be even traded for crypto. CBDCs are a mere digital alternative to cash, fully controlled by central banks.<\/p>\n<p><strong><em>Related: <\/em><\/strong><strong><em>Central bank digital currencies are dead in the water<\/em><\/strong><\/p>\n<h2><span class=\"ez-toc-section\" id=\"CBDCs_and_stablecoins\"><\/span>CBDCs and stablecoins<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>A reasonable question arises: If CBDCs and centralized stablecoins solve different market needs, why can&#8217;t they coexist? In principle, they could, but at a very high price for the latter. <\/p>\n<p>When it comes to exercising control over money in any form, central banks are quite strict and straightforward \u2014 if you want a piece of it, you need to be heavily regulated. As central banks enter into the digital currency world, they will <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>ly the same principles to any existing market participant. <\/p>\n<p>A great example of this approach can be found in a bill introduced to the U.S. Congress in late November 2020, called the Stablecoin Classification and Regulation Act of 2020. According to the <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.congress.gov\/bill\/116th-congress\/house-bill\/8827\/text\">bill<\/a>:<\/p>\n<ul>\n<li>A stablecoin can only be issued by an insured depository institution that is a member of the Federal Reserve System.<\/li>\n<li>In order to issue stablecoins or provide any stablecoin-related services, a written approval from the appropriate federal banking agency and the Federal Reserve System is required. <\/li>\n<\/ul>\n<p>In summary, the bill is intended to apply banking regulations to centralized stablecoin issuers, which could have a huge impact on stablecoins currently present on the market. Some of them are not regulated at all, while others are. However, they are not as strong as the bill suggests.<\/p>\n<p>Without going into specifics of each particular jurisdiction or the future of singular legislative initiatives, it is quite clear that a similar approach could be undertaken by regulators outside the United States.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Are_decentralized_stablecoins_set_to_replace_the_old_ones\"><\/span>Are decentralized stablecoins set to replace the old ones?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>It is also clear that the modern cryptocurrency industry cannot be imagined without stablecoins, and the potential disappearance of centralized stablecoins, as of now, could have an irreversible impact on the market. However, this impact could be mitigated by the transfer of liquidity into decentralized stablecoins, which can represent a competitive alternative and, at the same time, fall out of the scope of the central banks\u2019 regulations.<\/p>\n<p>The main issue with decentralized stablecoins has a conceptual nature \u2014 the absence of an issuer automatically leads to the absence of stability, guarantees, legal responsibilities and governance. Currently, there are a huge number of decentralized protocols looking to solve this issue by delegating governance to the community, and ensuring full transparency and control over collateral, which is represented by cryptocurrency or other stablecoins.<\/p>\n<p><strong><em>Related: You can\u2019t talk about blockchain and not bring up CBDCs and stablecoins<\/em><\/strong><\/p>\n<p>Despite solving part of the issue, the above leaves the stability problem in the air. Using cryptocurrency as collateral is the most obvious solution for decentralized protocols in terms of transparency, but at the same time, it can be hardly competitive with the U.S. dollar-pegged stablecoins in terms of stability (yes, DAI, we are looking at you now). <\/p>\n<p>So, it appears that a perfect solution might be a community-managed decentralized stablecoin, connected with real-world assets of stable value \u2014 currency, debt obligations or others. The emergence of such solutions could have a significant impact on the current stablecoin industry, providing traders with a stable and transparent alternative to currently existing centralized stablecoins, which are on the verge of elimination under the pressure of regulators and central banks. <\/p>\n<p class=\"post-content__disclaimer\"><em>The views, thoughts and opinions expressed here are the author\u2019s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.<\/em><\/p>\n<div>\n<div style=\"background: rgb(239, 239, 239); border: 1px solid rgb(204, 204, 204); padding: 10px;\"><strong>Artem Tolkachev<\/strong> is the founder and CEO of Tokenomica. Since 2011, he has been an intellectual property and information <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/technology\/\" data-internallinksmanager029f6b8e52c=\"4\" title=\"Technology\" target=\"_blank\" rel=\"noopener\">technology<\/a> lawyer and entrepreneur. In 2016, Artem founded and headed Deloitte CIS Blockchain Lab. As part of that initiative, he led a range of innovative projects involving the implementation of enterprise blockchain solutions, tokenization of real-world assets, tax and legal structuring of security token offerings, development of cryptocurrency, and blockchain legislation.<\/div>\n<\/div>\n<p><template data-name=\"subscription_form\" data-type=\"defi_newsletter\"><\/template><\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong>\n<\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/general\/\" target=\"_blank\" rel=\"noopener\">General category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/cointelegraph.com\/news\/a-nightmare-on-stable-street-centralized-stablecoins-may-be-doomed\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;# A nightmare on Stable Street: Centralized stablecoins may be doomed &#8221; Over the last couple of years, we have seen a lot of interest from central banks and governments in the stablecoin market. The reason behind it lies in the development of central bank digital currencies, or CBDCs. The idea of issuing a digital&#8230;<\/p>\n","protected":false},"author":1,"featured_media":229774,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/images.cointelegraph.com\/images\/1200_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjEtMDQvNDY5ZTg0MjYtOThlMy00M2Y1LWE5ZjMtZWQ3ZmVkYjVhMTMxLmpwZw==.jpg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[74894,75046,75022,74863,74983,75493,71511,70934,4965],"class_list":["post-229773","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-blockchain","tag-cbdc","tag-central-bank","tag-cryptocurrencies","tag-decentralization","tag-stablecoin","tag-government","tag-regulation","tag-technology"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/229773","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=229773"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/229773\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/229774"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=229773"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=229773"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=229773"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}