Stablecoins are digital tokens linked to assets such as the US dollar or the euro. They have been booming in recent years. They offer many advantages, particularly in terms of stability and security. However, their development also raises questions about regulation and the risks involved.
What are stablecoins?
Stablecoins are cryptocurrencies whose value is indexed to an asset. They generally refer to a national currency (US dollar, euro, gold and other precious metals). These assets, which are often "stable", make it possible to reduce the price volatility of these cryptocurrencies compared with other digital tokens (Bitcoin, Ethereum, etc.). They are therefore intended as an alternative solution to traditional crypto-assets. These often suffer from significant fluctuations.
The different types of stablecoins
- Currency-backed stablecoins: These are the most common, and are pegged to a fiat currency such as the US dollar (USDC, Tether) or the euro (EURS).
- Stablecoins backed by precious metals: These are linked to the price of a metal such as gold (PAX Gold), silver or platinum.
- Stablecoins backed by other crypto-assets: rarer, these are indexed to another cryptocurrency (DAI).
- Algorithmic stablecoins: Their value is maintained by an automatic adjustment based on mathematical algorithms (AMPL).
Why are stablecoins gaining in popularity?
The main advantages lie in their stability and the possibility of using them as a means of payment and store of value. As a result, cryptocurrency users are often looking for solutions to avoid the volatility and risks associated with other digital tokens. What's more, in some countries where local currencies are unstable, stablecoins offer an interesting alternative. They are used to carry out transactions and retain value.
Growing adoption in decentralised finance (DeFi)
Stablecoins also play a crucial role in decentralised finance (DeFi). This new form of peer-to-peer finance allows users to borrow, lend, trade and earn returns, bypassing traditional financial institutions. In this way, they serve as collateral or as a means of financing these activities.
The regulators' concerns
The rapid development of this form of finance is causing concern among certain authorities and international bodies (such as the Fed and the IMF). They fear that unregulated stablecoins pose risks to financial stability.
Calls for international regulation
Some experts and politicians believe that a comprehensive regulatory framework is needed to govern stablecoins. The proposals include requirements in terms of minimum reserves, transparency and the fight against money laundering. The European Commission is already working on a draft regulation entitled "Markets in Crypto-assets" (MiCA). This could create a harmonised legal framework for this form of finance within the European Union.
All in all, stablecoins are a major breakthrough in the world of cryptocurrencies. They offer several advantages over other digital assets. Nevertheless, their rapid growth and lack of appropriate regulation raise legitimate questions in terms of risk. The next few years will be crucial for their future.
