(Bloomberg) — While Bitcoin’s rise above $100,000 has grabbed headlines in 2024, many financial firms have focused more this year on another type of cryptocurrency whose price is never expected increase – or decrease for that matter.
Most read on Bloomberg
Traditional players such as Visa, PayPal Holdings Inc., Stripe Inc. and others are investing in projects involving stablecoins, which are cryptographic tokens typically designed to be pegged to the value of the U.S. dollar or other currency traditional.
This subsector of the digital assets space has proven to be a lucrative business, now that issuers are able to invest stablecoin-backed reserves in short-term U.S. Treasuries with attractive yields . And unlike Bitcoin and other tokens prone to price volatility, the use of stablecoins as real currency in transactions is gaining popularity around the world.
“We have seen significant growth in demand from some of the world’s largest companies participating in underserved payment verticals, such as global contractor and employee payments, financing of commerce and remittances,” said Rob Hadick, general partner at Digital-based venture capital firm Dragonfly. “There is both significant demand from end users to receive US dollars, which can be almost impossible using non-stable rails, but also from senders who want to bypass the corresponding banking system which can be slow, expensive and have high failure rates. »
The coming year is poised to see intensifying competition in the stablecoin space, whose market capitalization has collectively reached around $205 billion, according to tracker DeFiLlama. While Tether Holdings Ltd.’s USDT. has increased its market lead this year, reaching a current market capitalization of around $140 billion, headwinds to its dominance are emerging as the calendar turns to 2025.
European Union rules on crypto-asset markets require that all stablecoins listed on centralized exchanges be issued by an entity with a so-called electronic money license. Circle Internet Financial Ltd., Tether’s main competitor, received such a permit in July. Tether has not yet applied for one, meaning the token is at risk of being delisted by exchanges. Several crypto exchanges operating in the EU have already delisted USDT.
At the same time, several American companies are entering the sector. Visa has launched a new platform called Visa Tokenized Asset Platform allowing banks to issue stablecoins and other tokens. Financial technology company Revolut is considering issuing its own stablecoin, Bloomberg reported in September. Stripe, the payments company founded by billionaire brothers Patrick and John Collison, has acquired fintech platform Bridge, which specializes in stablecoin transactions. PayPal already has its own dollar-tracking cryptocurrency called PYUSD, created in collaboration with New York-based Paxos.
