The decision to close the Silvergate Exchange Network (SEN), a real-time payment service for institutional investors, by the troubled Silvergate Bank has changed the role of stablecoins and their issuers in cryptocurrency trading. It will expand, market research firm Kaiko said in a March 6 report.
Silvergate has major cryptocurrency companies as customers, and SEN has been widely used by institutional investors as a means of sending money to cryptocurrency exchanges. “With the demise of SEN, stablecoins are likely to become more commonplace among traders,” the report reads.
Instead of depositing dollars to cryptocurrency exchanges through banks, traders will transfer dollars to stablecoin issuers to convert their dollars into stablecoins and deposit them on exchanges, Kyco predicts. .
“But the problem is that stablecoin issuers still need access to banks that support crypto companies, so the risk has become more concentrated.”
Related article: What is a stablecoin?[Basic knowledge of crypto assets]
Decrease of USD in trading
Stablecoins such as Tether’s Tether (USDT) and Circle’s USD Coin (USDC) are used for cryptocurrency transactions in place of fiat currencies such as the dollar, supporting the cryptocurrency market. As stablecoins grow, transactions using fiat currencies are declining globally, Kaiko said.
Of particular note is the diminishing role of the dollar. In 2020, the number of dollar trading pairs on the exchange fell from 400 in 2021 to 326.
“Since the collapse of FTX, the dollar’s market share has consistently declined compared to the USDT, USDC and EUR trading pairs.”
For example, the ratio of USD to USDT in Bitcoin (BTC) trading volume recently reached a record high with USDT accounting for 93%. In 2017, it was just 3%.
“Currently, dollars and dollar-pegged stablecoins continue to be the foundation of the crypto economy. .
｜Translation: coindesk JAPAN
｜Editing: Takayuki Masuda
｜Original: Silvergate’s Struggles Will Likely Boost Stablecoins’ Role in Crypto Trading: Kaiko