Stablecoins Are Starting To Be A Focus

5 mo
LeoFinance
6 Min Read
1289 words

For years, the stablecoin market was something that most overlooked. It was utilized, existed, and people wrote about it once in a while. However, as cryptocurrency evolves, stablecoins are becoming more of a focus. This is bringing some attention that the purists in the industry might not want.

Of course, at the head of the list is the regulators. They are salivating over the opportunity to get their claws into this market. Politicians are also pulling out the stick, beating the drum every opportunity.

Then we have overall government control. Since the aforementioned figures like to promote the idea that cryptocurrency is used for illegal activities, the logical conclusion is this must be under the control of the governments.

The attention is increasing. For this reason, the industry is going to have to take action to counter the situation.

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Tether Freezes Account With $1 Million

Tether is the leading stablecoin. There are over 78 billion of them on the market. This is a small amount when we consider how much USD is issued. Nevertheless, the fact that each Tether is supposed to be backed by 1 USD has repeatedly been called into question.

We also see how this does not operate like other cryptocurrencies. With the likes of Bitcoin and Ethereum, what is in one's wallet is under their control. As long as the keys are with that individual, he or she can do as seen fit with the tokens. Of course, this puts the onus upon that person to make sure he or she is using the right addresses when moving things around. There is no way to reverse transactions (short of a hard fork).

It is not the case with Tether.

On their platform, there is a mechanism which allows them to lock certain tokens. This is a feature that fulfills the situation just described. It can be utilized to correct transactions sent to the wrong wallet.

This is not all that can happen.

A Tether spokesperson told The Block that Tether regularly works with regulators for freezing addresses.

Tether recently froze an account with $1 million in Tether in it. This means that the account cannot move the tokens.

...said Tether regularly works with regulators and law enforcement agencies worldwide, including on any cases related to hacks and scams, for freezing addresses.

Source

Naturally, this sounds wonderful on the surface. If someone steals money via a hack, most would say they prefer that person not be able to use the funds. Freezing the wallet makes a lot of sense.

The problem arises in the fact that if they can freeze these funds, they can freeze yours. Tether already admitted they work with law enforcement and governments. This means it will be open to other political pressures. One only needs to look at what the cannabis industry went through regarding payment systems.

In short, we have another opening for tyranny to enter. This is not what cryptocurrency is designed for.

Regulation Bonanza

Stablecoins are getting the attention of regulators all over the world. Could 2022 be the year we see a widescale amount of regulation emerge as governments seek to control what is taking place?

We already know the FUD is being piled on. In addition to the criminal activity talking point, we see the "stablecoins will de-stabilize" the global economy. The thought here is that stablecoins not backed by what is claimed could produce a level of economic uncertainty which magnifies risk.

Actually, there is some validity to this point. Stablecoins as an instrument pose no threat to the stability of the economy. Yet, if there is fraud, it could become an issue if it becomes big enough.

Of course, we have to keep things in context. Tether, which many question, claims to have $78 billion backing their tokens. This is a lot of money but could it take down the global economy if untrue? Bernie Madoff ran a Ponzi scheme to the tune of $60 billion. Was that a threat to the stability of either the global economy or financial system? Not even close.

Nevertheless, this is going to cause a bonanza among regulators. They awoke to the threat when Facebook announced the DIEM a number of years ago. Even though that token is still not to market, the regulators were put on high alert. The slumber they were enjoying ended.

In the United States, one of the biggest changes is that stablecoin issuers could need banking licenses. This will close the gap between the financial technology companies and traditional banks. It also could force a company like Circle to get FDIC insurance on the holdings. Of course, this would give them the same rights as banks, allowing them to secure deposits which could be used to purchase longer term bonds or engage in loan origination.

As we can see, this is a hijacking of the entire concept of cryptocurrency.

Algorithm Based Stablecoins

We spent a great deal of time discussing different aspects of the Hive Backed Dollar (HBD). This is an alternative approach to the traditional stablecoin idea. Instead of backing it with USD, it is using algorithms to provide the value. By tying it to another asset (HIVE), we see how the full value is derived.

There is also a level of transparency that is not available with the likes of USDT or USDC. At present, we only have their word as to what is backing the tokens.

The recent popularity of UST (Terra) shows there is a large market for these types of stablecoins. It, too, is based upon an algorithm.

Another factor that is becoming increasingly important is the idea of decentralization. By this we mean the fact there is no individual or company behind the issuance of the token. HBD is generated by the coding in the blockchain. This means that regulators and other associated entities cannot take any legal action.

The final factor is that these tokens have nothing to do with USD. Unlike the others, the USD is only a unit of measure. Hence, nowhere in the process is the USD involved. The currency is not held by anyone nor does it engage with the stablecoins.

It is going to be upsetting to those in power when they realize there is truly nothing they can do about these tokens if they are not issued by a company. If they do reside on a blockchain, there is little action to take.

We are rapidly moving towards a world where one's money cannot be locked or a wallet frozen. Unlike Tether, if one has $1 million worth of HBD sitting in an account, it can be moved at will. Again, this might be upsetting for those who get the money through nefarious actions. However, to protect people from tyranny, it is a small price to pay.

Governments are known for taking people's money. That is the appeal of CBDCs. Politicians and bureaucrats think it is their right to determine what people can do with their money. Many in cryptocurrency, naturally, disagree with this.

Once again, whatever regulation they want to present, we must simply develop around it. Here is an example of how something like the Hive Backed Dollar is becoming ever more important.

As stablecoins come into focus, we need to concentrate on those that work around what the governments are trying to do. This is where the next battle is going to take place.

Fortunately, the outcome is already known. There is nothing they can do about an algorithmic driven stablecoin that is resident at the blockchain level.


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1

The problem arises in the fact that if they can freeze these funds, they can freeze yours. Tether already admitted they work with law enforcement and governments. This means it will be open to other political pressures.

That's centralization at its best, having over a million dollar is what they call a crime and that's what decentralization definitely stands against.

As we can see, this is a hijacking of the entire concept of cryptocurrency.

No doubt about that, even the sight of then working with law enforcement and government agencies means they can't be decentralized in any way, while crypto is meant to be decentralized.

If they do reside on a blockchain, there is little action to take.

To my own own knowledge I believe that's the best way to go and without them knowing the whole information about this we can always be one step ahead of them.

HBD is really going to be big deal in the future of stable coin and the 12% savings payout makes it all exciting to watch.

We are making history right here on hive and they(regulators) are too blind to see what's going on, by the time they do, there won't be anything to do by then.

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3

I agree the 12% is nice, but considering the returns in crypto I think I agree that it should be raised to 20%. That's solid number to be able to advertise as a solid return.

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Things are still in early days and trying to keep HBD stable is the top priority ATM.

The percentage earlier was at 10% so getting to 20% in the future is possible or not but whichever ways its always going to be one of the best returns here on hive. You don't have to do anything, its very much preferable compared to keeping your money in the bank.

You have to crawl before you walk then you can run after, I'm positive things might go in that direction later but for now sustainability should be at its core.

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Fair

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I would dare to say that USDT is the crypto with more movement of all, it is the intermediary between the usual crypto like bitcoin, the most unstable altcoins and fiat money.

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I definitely agree that stable coins are becoming more popular. When the market is shaky and there is a bear market it’s a good place to be and then buy back at lower levels.

That’s why I think Hive is a good place to be during a bear market, especially now with HBD bonds. Not only can you protect the value of your money but you will get a 12 percent increase.

But I have a question(s) 🙋‍♂️ How stable is the HBD ? If We are in for a long bear market and not many people investing in Hive and it drops to 10-20 cents, as in the same time the bonds keep printing more HBD, can the HBD price keep a value that is close to one USD ?

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Hive Bonds are not an actual thing. That is something that I put out as a discussion topic.

What you are referring to is the savings on HBD. People can invest their HBD into the savings account and earn 12%. The payout is based upon HBD, not based upon the price of HBD. So you get .12 HBD per year for each one put into the savings account.

HBD is worth $1 worth of HIVE on conversion. Obviously the peg is not exact as we continually see. There does seem, however, to be a floor on HBD. It is holding up fairly well, only down 5% below its peg in spite of the sell off. That is what happens with liquidity.

The HBD stabilizer keeps running so as to put a "floor" in on HBD (or so we believe).

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2

Thanks a lot for taking the time and explaining this, it is much more clear now :)

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I see stable coins as a safe harbour. If you don't want to keep your assests in fiats and also don't want to take the risk of the price fluctuations of cryptocurrencies your way to stable coins.

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Stablecoins are the ideal "parking spot" for crypto gains. That is what people do when the risk off; take the profits and put them into something stable.

That is one use case for HBD going forward. We still need to create it of course.

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5 mo

It also could force a company like Circle to get FDIC insurance on the holdings

If that were to happen do you think some of the companies could go the same way various credit unions have? For example, in Michigan weed is legal at the state level, but not the federal level. Many non FDIC insured credit unions have been able to handle those weed fund where Federally insured Credit Unions and banks can't.

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2

I dont think the stablecoin issuers will be given a chance to go the credit union route. Those entities are set up differently. It is the regulators who are going to force the likes of Circle to follow the banking regulation.

Personally, I dont think they will have a choice in the matter.

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2
5 mo

Probably not for the existing ones, but what about new ones that pop up after the fact? Fun fact, we actually have places that put billboards on the side of the highway letting people know their weed money is safe with them!

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That said, if they do not want to have the FDIC, they can avoid becoming a depository institution and lending platform. Instead they could just do as they are now, providing stablecoins. If they do have the other features, then they might be forced into FDIC.

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1

I can't wait till I can use HBD in DeFi to be honest.

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Well technically you already can: HBD savings is a form of DeFi; very basic at the moment but it is DeFi nonetheless.

I think we will see something with Cubfinance fairly soon. Just a guess but I am thinking they roll something out first quarter.

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1

A good read. I'm still working my head around the crypto space & I find this article insightful.

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Take it piece by piece. There is a lot to learn within the crypto world. We all started not knowing a great deal.

Keep at it and more will make sense to you.

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If tether can froze 1 billion dollars account,it Means we are not save. We need to trade with caution. I believe Soon tether will be regularise because of this, they started.

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It does mean they are in bed with the government. If they get a notice to freeze an account because of "terrorism", true or not, Tether will freeze it.

That is setting us another another path to tyranny.

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Thank you

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5 mo

well have stable coin only for trading helps a lot in the bear market

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We will see how well HBD holds us during the bear. That has not really been tested since focus was placed upon it.

Hopefully the HBD stabilizer will help it hold up.

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Then we have overall government control. Since the aforementioned figures like to promote the idea that cryptocurrency is used for illegal activities, the logical conclusion is this must be under the control of the governments.

This is what we are facing here in my country. The government banned the use of local banks to trade crypto but went to create their own stable coin e Naira expecting us to jump on the idea.

All they care about is their pockets and not promoting secured transactions as they claim.

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That is why we need to establish secure ways around it. The battle is only getting started. People need to turn to crypto for the safety and that will feed into what is being developed.

It all adds up; this is the basis of the idea of network effect.

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But what will happen if the creators get corrupted and turns greedy?

Then I guess we are all doomed

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What do you mean? What creators?

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Developers I mean

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I was going to write about this freezing news, damn, you beat me to it! 0_0

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You're not beaten yet @badbitch . You can still post your article and we'll still read it because it'll be from your own point of view

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Don't you think I understand that before writing this comment?

It's basically not going look any much different, I intend to push out more value that recycle informations...

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Sorry. I will type slower next time so you can get yours out first. LOL

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Stable coin is making the difference here in Africa

My number one point is inflation. Using my country as a major example. Naira is not stable and most times the price of goods and services provided by people increasing on daily bases. With usdt I don’t have to worry about it and keeping my usdt keep me save.

The second part is the apr that banks can’t give me.

So many reasons actually

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1

For currencies like the Naira, it is smart to get out of them. It is like Venezuela and the Bolivar, those people got out of it, often using the USD. Stablecoins are able to help offset that because, at least with the ones "backed" by it, we are looking at a USD based asset.

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I thank God I came across usd because it has help in many ways our currency can’t

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Do you have easy access to USDC ? Instead of USDT?
I don’t think they freeze funds.

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1

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0

The battle is still on, the government is still trying to control the crypto space and do what they're always good at doing bést. They always use the fight for criminal activities as an edge to gain access to people's finances and invade everyone's space.

It's a shame what's happening with Tether and as much as its helping fight crime it's killing the concept of decentralization. The concept of crypto is already beaten if other people can easily have access to my earnings. That isn't great.

Glad with the way HBD is going, it's growing really well and I can see a bright future for Hive as well as the HBD.

This post was really informative ❤️💙

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It is a battle that is going to rage a while. Basically it is the bureaucrats/politicians against the developers. Who do you think will win?

In this one, my bet is on the developers. They can code around whatever the government puts forth.

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Well, we'll just have to see how long the battle rages on for. The politicians/bureaucrats won't give up easily but like you said, the developers are the ones with the key, so they'll keep doing what they know how to do best.

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No you can bank on them giving all they have to retain control and power. We are not going to see this ending anytime soon.

A lot of work still ahead. Each day we need to keep pushing things forward. Step-by-step is the only way. This is not going to be realized anytime soon.

That is why it is so tough, persistence is required.

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Yes, use the terrorist story to take away our rights at airports and make us pay to treated like a free citizen again. Not cool.

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1

I don't particularly see a problem with the assets backing the stable coins because the banks have done worst with loans. They collateralize everything and it might be subjective towards what that value could be. In a way, I prefer the HBD way of getting $1 of HIVE for 1 HBD.

It really is scary when things are frozen and I really hope they don't cave to the authorities. However I don't have much faith in that because they probably won't survive long if they show a strong stance.

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The fear is what happens if, instead of $1 for each Tether out there, there is really only $.25. This is where the instability could enter the picture.

Of course the solution is the algo driven tokens that have a lot more transparency since no USD holdings is required.

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Just yesterday 66% of all crypto trades were stable coins. Could be the drop and people selling getting into a safe haven or could be something else. Stable coins are going to be huge within the next few years.

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Agree, many investors flee to stable coins during volatile times especially downtrends. Stable coins in some form are important and won’t be going on away anytime soon.

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The problem arises in the fact that if they can freeze these funds, they can freeze yours.

This makes holding USDT completely useless.

You're taking all the risk, with absolutely none of the potential reward.

You may as well be holding cash in a USD denominated bank account.

At least then there is no risk that Tether Inc is lying to you about how collateralised the coin actually is

Tip: USDT is NOT backed 1:1 in the way you think.

Algorithmic stablecoins such as Hive Backed Dollars and Terra's UST, are the only way forward.

The market will catch up soon enough.

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12

We need to keep pushing things forward with HBD. I agree that algorithmic stablecoins are the future and it is important to make them as usable as possible.

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I personally do not think stable coins such as USDT are as stable as they claim and there might be a lot of underground activities being covered up just to continue the perception of it being stable

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It is pretty obvious that the days of "centralized" stable coins are coming to and end. HBD has had a pretty good make-over, may need a bit of work yet, but the timing could not be better for Hive and HBD.

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I am not sure they will come to an end. They will end up as banks (at the least the companies behind them) in the US. This will allow them to operate, be audited, and have to comply with regulation.

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You are totally right. They are just coming to an end for us who have better alternatives sprouting up everywhere.

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Did you see the latest? ETH/UST pair. That's going to link Luna with Ethereum. Amazing stuff.

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The buildout continues. We need to keep pushing HBD forward.

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Though I know somehow where politicians and bureaucrats are coming from, but still I have difficulty understanding their kind. Their passion for central control does not stop to amaze me. How I wish that in time their breed would decrease or go extinct if that would be possible. They swear an oath in public office to serve not their personal interests, but the people’s welfare, and in crypto currency, people have something that concretely demonstrates this talk about “inclusive” economy, and yet they see it as destabilizing the already unstable economic system based on fiat money. Can something stable such as crypto currency or stable coins really destabilize a system that is already unstable? Is it not more proper to think that stable coins would supply the needed stability in a very unreliable global economy that we have?

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It is all about power and power comes from centralization.

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Yes, and their talk of returning power back to the people is either just a mere political rhetoric or they want people to follow their footsteps in acquiring a bigger share from the public coffer. However, if such empowerment would imply a concrete implementation as what's happening in the crypto world, they don't see it as empowerment, but a threat. I am just having difficulty to understand why most people that we know personally still believe in such illusory promises.

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I didn't know Tether can freeze accounts. I didn't like USDT anyway, but that's another reason to avoid it.

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LOL I presume neither did the one with the $1 million in the wallet.

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Well, there were enough signs Tether is not to be trusted... I don't feel too sorry for them.

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I think normally stable coins aren't as interesting as say altcoins due to the lack of massive gains or traction, but whenever there is a bear market that tends to get people to gravitate towards stable coins more and that is why I am so bullish on the future of HBD. It works the same in stocks as well as markets are down is when people start looking into lower risk dividend paying stocks or "stable" stocks that have a longer track record.

I'm sure as we return to a bull market we will see a large shift in stats as well as markets typically work in waves.

1

I never knew that about tether and am glad I never partook in it. It really seems that HBD will become much more successful once it breaks all ties to the USD. I believe every crypto should.
Starting an economy based around crypt is the next logical step, in my opinion. Why are we still measuring ourselves by things we are trying to replace.
For me, This one foot in and one foot out shows a lack of confidence in what is being created. Just me two-cent (I use Euro)

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You make a good point about why are we measuring ourselves by something we want to replace. I guess it’s because you are right about us wanting one foot in and one foot out.

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I read recently that President Biden had sent a notice to the US Congress to pass laws regulating Stablecoins like banks, or else he would regulate them by executive order.
Initially, I was happy thinking this would place Crypyocurrency on a better regulatory footing. But now after reading your post, I am not so sure. This post definitely is food for thought.

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I didn’t realize that Tether could freeze people’s wallets. Interesting. I have always been wary of Tether because of the sketchy seeming nature of its dollar backed claims. But this puts their sketchiness at a new high.

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I could be wrong but the time of the politician is limited. It is almost like we are trapped between a rock and a hard place.
If we do not have any regulation then crime will dominate, but if we have too much regulation then the system is doomed to die a slow death because of corruption.
As a community, if there was a way for us to police our own.

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