The stablecoin market has been under regulatory scrutiny recently, particularly after Paxos, a US-based Trust Company, the issuer of the BUSD stablecoin, announced it would cease issuing this stablecoin. The move follows US regulators’ labelling of it as an unregistered security.
The Future Of Stablecoins
This development has led investors to question the future of stablecoins in general. Amidst all the uncertainty, however, USDT, the largest stablecoin in the world, has experienced a massive increase in market capitalization, with an addition of 2 billion dollars, bringing its total market capitalization to 70 billion.
Circle’s USD Coin, the second-ranking stablecoin, has also experienced growth, adding over $7 to reach $42 billion. Conversely, BUSD’s market value has dropped from 16 billion dollars to $13 billion, causing its market share to fall from 12% to 9%.
Despite BUSD’s regulatory issues, its impact on the broader cryptocurrency market volume has dropped. Bitcoin rose by 14% to $24,902 over the past week, indicating that the market appears to have adjusted to the uncertainty surrounding stablecoins.
According to Vetle Lunde, an analyst at Arcane Research, the regulatory ruling is not expected to constitute a significant structural shift in the market at this time. However, the enactment against other stablecoins like USDC or non-U.S. domiciled USDT may have an adverse effect.
Moreover, the buzz around stablecoins on Binance has helped increase trade volume on other exchanges.
Stablecoins and Investment Strategies
As a catalyst in the cryptocurrency industry, stablecoins provide access to major and obscure cryptocurrency assets, tokens, and assets. However, the downturn in BUSD’s dominant position due to regulatory issues has renewed interest in USDT.
Despite the uncertainty, many investors still consider stablecoins as a promising tool for the wider adoption of cryptocurrencies. Hence, they expect the stablecoin market to continue to grow and mature as the regulatory landscape becomes clearer.
Meanwhile, the market has adjusted to the regulatory scrutiny on the BUSD stablecoin, with USDT and USD Coin growing in market capitalization.
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