Stablecoins Emerging as a ‘Complement to Existing Payment Ecosystems’

An overwhelming number of banks are considering launching their own stablecoins, according to analysts at PwC.

The report highlights that over 80% of central banks are either considering launching a central bank digital currency (CBDC) or have already launched their own digital currency. 

PwC analysts for the first time included a stablecoin overview in the annual CBDC index report, noting that privately issued tokens will continue to evolve and exist alongside CBDCs. 

However, global frameworks are still evolving when it comes to regulating stablecoins, the report points out. But, PwC expects that national authorities will build a stablecoin oversight framework in alignment with the recommendations laid down by the Financial Stability Board (FSB) by July. 

Stablecoins reached a record market cap this year

Stablecoins hit a market capitalization of around $190 billion this year and will continue to grow as the tokens offer many of the same benefits as a CBDC without the surveillance that comes with a government-issued currency, the report noted. 

With more regulations expected this year, Matt Blumenfeld, digital asset specialist at PwC, said: “The role of the stablecoin in the crypto markets has and will continue to evolve as adoption of crypto increases, forcing a more prominent role of stablecoins across the larger financial ecosystem.”

The stablecoin market is not devoid of controversy. Tether, the largest stablecoin by market cap, was fined $41 million last year by the US Commodities Futures Trading Commission (CFTC). 

The allegations revolved around USDT misstating that its token was backed one-to-one by the US dollar. Despite the face-off with the authorities, Tether maintains the largest cap of $82.51 billion at the time of writing. 

Blumenfeld believes that regulation will strengthen the “importance and give credence to the role of stablecoins.”

Economist Eswar Prasad also noted in a recent interview that stablecoins are “beginning to gain traction.” 

And the U.K. government is moving to recognize stablecoins as a valid form of payment, it announced yesterday.

This is contrary to last month’s report by the New York Federal Reserve which claims stablecoins will not be an integral part of future payment systems.

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