Complex systems that might be prone to instability and unpredictability can remain more stable if they are built on a stable base. The US dollar has been at the base of the Western world’s economy for decades, allowing a greater degree of continuity from day to day and year to year. The US dollar has been the world reserve currency and the preferred unit of account for a long time, but there has been a gradual shift to increasing acceptance of other currencies in international trade. While the US dollar is dominant in international trade, that position is eroding, and of course people use local currencies for day to day life.
People can use tokens that represent units of fiat currency on Web 3.0. Stablecoins pegged to some fiat currencies are available to Web 3.0 users. Because the US dollar is the dominant fiat currency, many represent the equivalent of one US dollar: USDT, BUSD, USDC, DAI are just a few examples. But as we have noted, that dominance is fading.
Tether, creator of USDT, has always been aware of the growing need to offer stablecoins for other currencies. In fact, in recent months, Tether has created EURT for Euros, XAUT (Tether Gold), MXNT (Mexican Peso Tether) and is going to launch another one: GBPT, the Tether product based on the Great Britain Pound.
But Tether suffered a lot from the market downturn with 6 billions USDT withdrawn from circulating value, because many people preferred to exit the market by returning their stablecoins to the company. Furthermore, many accusations have been made against Tether for its lack of transparency.
Circle and Coinbase are positioned to take advantage of Tether’s weakness and try to usurp the leader. Circle has already issued their own EURC stablecoin and Coinbase will offer another as yet unnamed token to compete with EURT.
Circle will expand USDC to five new blockchains in an attempt to strengthen its market position and bolster access across multiple chains. USDC will begin to circulate on the Arbitrum One, NEAR, Optimism and Polkadot chains by the end of this year, with plans to enter the Cosmos ecosystem sometime in early 2023.
Today, USDT is the market leader, but USDC is growing faster than its competitor. Do you think that in the coming months we could see USDC overtake USDT, or will the Tether retain their lead?
Do you think the current stablecoin options are sufficient for today and for the future? Or web 3.0 (or web 5.0) needs new stablecoins?