tl;dr
The U.S. Senate recently passed a bill to legalize stablecoin issuance, promising to enable instant blockchain payments nationwide. Crypto advocates predict a surge of new stablecoins challenging current leaders like Tether and Circle. However, Moody’s analysts caution that widespread adoption faces...
The U.S. Senate recently approved a bill to legalize stablecoin issuance, promising to enable instant blockchain payments nationwide. Crypto advocates foresee a surge of stablecoins competing with current leaders like Tether and Circle. However, Moody’s analysts warn that significant adoption barriers remain, casting doubt on the viability of many new stablecoin issuers and their business models.
Major banks might opt for tokenized bank deposits over creating costly stablecoins to streamline payments, questioning the necessity of stablecoins when simpler alternatives exist. Meanwhile, retailers considering launching proprietary stablecoins risk overwhelming consumers with multiple closed-system tokens, complicating liquidity and exchanges between different stablecoins.
Moody’s highlights that for stablecoins to be truly effective, robust liquidity pools must exist to facilitate exchanges between tokens from different issuers, similar to mechanisms in decentralized finance. Without such infrastructure, consumers might need to convert between fiat and various stablecoins, undermining the convenience stablecoins aim to provide.
Despite legislative support and industry interest, practical challenges—including high costs, consumer inconvenience, and liquidity issues—may limit the flood of stablecoins many anticipate. Moody’s experts remain skeptical that many new stablecoins will quickly emerge or gain widespread adoption, suggesting that the current hype may overstate the near-term impact of stablecoin legalization in the U.S.