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Written by Cyndie Martini
on June 22, 2021

A stablecoin is a type of cryptocurrency that is meant to act as a fiat currency. Rather than the volatility of bitcoin, stablecoins keep to their namesake and remain fairly stable. Their goal is to mimic the movement of a specific real currency. For example, USDC is the U.S. dollar coin or USD stablecoin.

Cryptocurrency exchanges often use stablecoins as a form of deposit and as collateral for cryptocurrency loans.

Stablecoins have been under a lot of regulatory scrutiny lately. This isn't a negative for Stablecoins. On the contrary, it means the government is taking them more seriously as a potential form of currency. However, it is still very early days. Like many of their volatile counterparts, they face a few hurdles.

At a recent hearing, Sen. Elizabeth Warren summarized the obstacles that stablecoins will need to overcome before they can be taken seriously. “If you want to send money to somebody else, digital currency can be easier and faster,” said Warren. “But in order for those advantages to be realized, the digital version needs to be secure, stable and accepted everywhere.”

Of Warren's three requirements, stability is the only one that stablecoins come closest to. Unfortunately, security is still an issue with cryptocurrencies, and they are certainly not accepted everywhere.

Governmental regulatory frameworks will allow stablecoins to proliferate as an accepted means of payment and basically currency. This will mean true digital currency, which the U.S. does not have as an official currency. Sure, there are plenty of ways to move money around digitally, such as Zelle, Paypal, and Venmo. However, those are just money transfer services.

The formalization of stablecoins as currency will allow for more efficient movement of money. Users of stablecoins will not need to create accounts on cryptocurrency exchanges or be required to do fiat/crypto conversions. For merchants, accepting stablecois will likely be as easy as accepting credit and debit cards.

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