Stablecoins steal the limelight from subdued bitcoin

Dec 13 (Reuters) – As Bitcoin, the world’s largest digital currency, struggles to recover from a massive meltdown, the regulatory and private sector focus has shifted to another part of the cryptocurrency world: stablecoins.

Last week saw Meta Platforms Inc (FB.O) trial its own stablecoin payments wallet, while the world’s largest Visa (VN) payment processor launched a crypto advisory service and said that stablecoins could become a medium of exchange instead of cryptocurrencies.

Stablecoins are a form of virtual currency with values ​​tied to traditional assets such as the US dollar or commodities, and their rise has accelerated the debate by central banks around the world about digital versions of their currencies.

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Analysts at digital platform Alkemi Network were among those hailing Visa’s move as evidence that the ecosystem for decentralized finance and cryptocurrency is maturing.

“Making a visible attempt to play by the rules of traditional finance is definitely gaining momentum as a movement within the cryptocurrency ecosystem,” they wrote.

The Japanese financial regulator said last week that it will come up with rules in 2022 to restrict the issuance of stablecoins to banks and wire transfer companies.

In the US, even as top executives from major crypto companies including Coinbase (COIN.O) and Circle are urging Congress to provide clearer, articulated rules for the industry, Treasury Secretary Janet Yellen and a group of bank CEOs have discussed the need for regulation stablecoins. .

The Meta crypto wallet, Novi, will allow users to send and receive money through the messaging app of the social media giant WhatsApp and will use a stablecoin called Pax Dollar.

Research platform Delphi Digital says stablecoins have grown exponentially in the past month, with the market capitalization of the top five stablecoins swelling to nearly $150 billion from $129 billion. Tether, the largest stablecoin, has a market capitalization of $76 billion.

Meanwhile, the central banks of Switzerland and France announced their success in the first European cross-border trial of central bank digital currency payments (CBDC), after testing the Jura project, named after the mountains between the two countries.

bargain hunters

With Bitcoin capping at $50,000 for most days of the week since its rapid crash on December 4, the coin’s market capitalization on CoinMarketCap has reached $15,541 at $2.25 trillion, compared to $2.6 trillion at the beginning of December.

While cryptocurrencies have benefited from easier monetary conditions even in a higher inflation environment, Chris Weston, head of research at brokerage Pepperstone in Melbourne, said it was difficult to say what would happen when the Federal Reserve accelerates monetary policy tightening or prepares to raise interest rates.

“I feel like there will be headwinds, but as always with crypto, the only thing you can have is an open mind,” Weston said.

Bargain hunters appeared. The number of active bitcoin addresses reached 1 million after the crash, according to a report by Arcane Research, the highest level since the cryptocurrency’s 35% plunge in May.

“Sleeping bitcoin holders seem to have been awakened by volatility,” Arkan analysts said.

One notable buyer was MicroStrategy, led by Michael Saylor, which added 1,434 bitcoins to its holdings for $82.4 million, the company said last week.

However, the number of bitcoin wallets with more than 1,000 coins declined during the week, which could indicate profit-taking among the big players, Kraken Digital reported.

Cryptocurrencies topped the list of assets expected to see a correction in 2022, according to a survey of 500 global institutional investors by Natixis Investment Managers.

Another Visa survey shows that 40% of global cryptocurrency owners are likely or very likely to switch their primary bank to a crypto-related product in the next 12 months.

The Natixis survey shows that only 4 in 10 institutions consider crypto a legitimate investment option, although 28% are already investing in crypto, 90% expect to maintain or increase their allocation in 2022.

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Additional reporting by Lisa Pauline Matakal in Bengaluru and Vidya Ranganathan in Singapore; Editing by Alison Williams

Our Standards: Thomson Reuters Trust Principles.

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