Stablecoins: A bridge between traditional finance and crypto

What are stablecoins used for? 

Stablecoins serve several purposes:

• Bridging the gap between traditional and crypto finance: They allow for easier conversion between fiat currencies and crypto-assets, making it easier for investors to enter the crypto market.
  
  
• Reducing volatility: By maintaining a stable value, they can help to reduce the overall volatility of the cryptocurrency market.
  
  
• Facilitating payments: Stablecoins can be used for faster and cheaper international payments compared to traditional banking methods.
  
  
• Providing a store of value: They can be used as a stable store of value, similar to traditional currencies.

Why are stablecoins useful? 

Stablecoins offer several benefits, including their stable value, which reduces the risk of significant price fluctuations. Additionally, they can make it easier for people to enter the crypto market, facilitating faster and cheaper payments. Moreover, stablecoins can also drive innovation in the financial sector, leading to new and improved financial products and services.

The future of stablecoins and wider adoption of crypto

As stablecoins continue to gain popularity and acceptance, they could play a crucial role in bridging the gap between traditional and crypto finance. This could lead to increased mainstream adoption of crypto-assets and a more decentralised financial system.

However, there are also challenges to overcome. Regulatory uncertainty, security concerns, and the potential for market manipulation are some of the factors that could hinder the growth of stablecoins and crypto-assets.

What stablecoins have been launched? 

One of the most prominent examples of a stablecoin is Tether (USDT), which is pegged to the US dollar. Other stablecoins include USD Coin (USDC) and Binance USD (BUSD). These stablecoins have a wide range of use cases, including facilitating faster and more cost-effective international payments, providing a stable store of value within the volatile cryptocurrency market, and enabling various decentralised finance (DeFi) applications like lending and borrowing.

One example of stablecoin in the context of wider institutional adoption is the launch of EUR CoinVertible (EURCV) by Société Générale-FORGE (SG-FORGE), an integrated and regulated subsidiary of Société Générale. EURCV is a fully collateralised stablecoin designed to bridge the gap between traditional finance and digital assets. It’s also an electronic money token i  as such term is defined in Article 3 (7)MiCAR. This means EURCV offers the benefits of digital assets, such as efficiency and security, while potentially mitigating some of the volatility associated with many crypto-assets. 

Disclaimer

Investing in digital assets carries risks, crypto is volatile. In extreme cases, the invested amount may be lost completely. This marketing communications do not constitute investment advice.. In no way is positive performance or results guaranteed. You should keep yourself informed and understand the risks involved in buying and holding digital assets. For more information, including right of redemption please refer to the whitepaper issued by Société Générale - Forge, which can be found on the issuer's website. Bitpanda does not intend to publicly offer the asset. 

This article is distributed for informational purposes, and it is not to be construed as an offer or recommendation. It does not constitute and cannot replace investment advice.

Bitpanda does not make any representations or warranties as to the accuracy and completeness of any information contained herein. 

Investing carries risks. You could lose all the money you invest.