Stablecoins implicitly solve the issue of volatility in the crypto asset class that the institutions are facing, which in turn are holding them back from investing in crypto. Lack of institutional investments is one of the biggest issues of crypto and blockchain at present. Solving the problems of retail and institutional investors is the only way ahead for the growth of crypto market at the moment. Talking to BlockPublisher, the CEO and founder of Swiss fintech company Aximetria, Alexey Ermakov stated;
The issue of volatility is resolved by the stablebcoins.
The issue of volatility has been there in crypto since its advent and multiple projects have flooded in the crypto world with their attempts to eliminate these problems while increasing liquidity by bringing in more investors. The primary examples of such projects are stablecoins.
Bitcoin still operates as a commodity rather than transactional money and volatility restricts its use cases. Stablecoins and fiatcoins save the day by their 1:1 peg to their respective currencies. Currencies like bitcoin work better if retained as a store of value.
The addition of stablecoins to the market serves as a better alternative for making payments while also eliminating the market volatility. Tether (USDT), with its market cap of around $2 billion is high up in the market with its contribution to the volatility issue. If more stablecoins are introduced, the volatility would decrease naturally while also serving the purpose of a decentralized stable economy. Further adding to the issues of the institutions, Alexey added;
Storage issues and day-to-day use depend on many factors, regulation, tax administration, technological convenience, and many others.
Lack of regulatory clarity, legal issues, and risks of security are the reasons institutions around the world have been skeptical about crypto and blockchain investments. With these problems solved, the use cases would naturally increase while also bringing bandwagoners to the market with their retail investments, due to the human psychology of “Fear of missing out”.
It has been seen in the past that people have been excited to see Starbucks getting involved with crypto, naturally developing an inclination towards crypto and blockchain. UFC also partnered up with litecoin which brought a lot of attention and investments to LTC but the only way the crypto world can see institutional investment coming is an ETF, which would naturally provide more security, ease of storage and use, and elimination of legal issues. The SEC is still looking into ways how crypto can be molded according to their will so that their concerns about security and surveillance are catered. According to Alexey,
For corporate clients, in fact, the only legal way to buy crypto assets today is to buy an ETF, all other options are a compromise with information security risks and tax administration problems.
Crypto use cases are limited. To move ahead, new startups and projects with better use cases are expected to enter the market. Crypto projects, as of now, face huge backlash because most of the startups exist just for the sake of making a crypto and blockchain startup. The basic problems that require decentralized economic solutions should be catered rather than bringing projects to the decentralized domain who have better alternatives centrally.
More private blockchains should be introduced to solve more specific issues of financial institutions while also maintaining the integrity of blockchains. For now, private blockchains are being bashed due to their centralized-decentralized nature. Looking at the broader spectrum, if the scaled-down problems of institutions are addressed rather than the general problems as a whole, the institutions would be more inclined towards investing and using the technology to their advantage.