By A K Shrivastav
The time of private currency seems to have arrived. Nearly a dozen tech companies and traditional financial institutions globally have announced their intentions to launch stablecoins. While these companies have their own business ecosystem where their stablecoins can be used, they also target people in general as their customers. For example, Uber is reportedly exploring the possibility to launch their stablecoin to cut transaction costs and bring efficiency in payments on its platform. Other notable names are Apple, X, Walmart, JD.com, Amazon, and Bank of America.
These developments follow Donald Trump’s electoral victory and becoming the President of the world’s largest economy. Trump had promised during his election campaign to pursue crypto-friendly policies once he becomes the US President. Currently, the US Congress is discussing the Genius Act, which proposes to provide a regulatory framework for stablecoins. If this bill is passed, which seems very likely, American companies would be able to launch their stablecoins – their own digital currencies.
Stablecoins are digital tokens, hosted on blockchain networks. It’s a type of cryptocurrency. The benefit of stablecoin is that its value does not change with market volatility. Stablecoins are pegged to traditional currencies such as US Dollars and Euro. In some cases, it could also be pegged against gold and similar products. A key feature of stablecoin is that for every stablecoin issued, companies have to keep cash reserves in a bank. In some cases, companies might choose to put the money in government bonds. It means, those who choose to keep their money in stablecoin can rest assured that their stablecoins’ value will not change.
For companies, adopting stablecoins brings two main advantages. Firstly, the transaction time is almost instant. In traditional banking and finance, international payments can take 1 day to a week. Compared to this, stablecoin takes just a few seconds or a few minutes for the transaction to complete. Secondly, transaction cost is almost negligible, which is a big plus as money transfer through other means can cost from 5% to 25%, depending on jurisdictions and payment methods. These two benefits are so significant that big companies can’t ignore them.
Realising the importance of stablecoins, the Trump administration has introduced the Genius Act, which aims to provide a clear and encouraging regulatory environment to launch and run stablecoins by private companies. If the Genius Act is passed by the Congress, companies can easily launch their stablecoins. Right now, there are two major stablecoins that capture almost 90% of the market. These are USDT by Tether and USDC by a consortium that includes prominent crypto exchange, Coinbase. After the Genius Act is passed, big tech companies like Apple, Meta, X and others will launch their stablecoins. The stablecoin market right now is worth about $200 billion. After the Genius Act is passed, it’s believed that the stablecoin market will soon achieve a trillion-dollar milestone.
In India, the crypto circle is abuzz with a likely introduction of a discussion paper on crypto any time now. However, developments have been so quick and substantial in the stablecoin space that the Indian government might take a relook at its planned introduction of a discussion paper and potentially a policy for the crypto sector.
India which received $119.4 billion in remittances in 2024 can hardly ignore the solution that stablecoins bring to the table. Going by the trends, whether India brings a legislation for the entire crypto sector or just for the stablecoin market, it can’t delay it any further as the US has taken a lead by showing the intention and will-power to provide a clear and encouraging policy stance on the crypto sector. India with its large talent pool and startup ecosystems can hardly ignore the changing financial landscape.
One of the most powerful oppositions to crypto in India came from the previous Governor of the Reserve Bank of India (RBI), Shaktikanta Das, who believed crypto poses a serious threat to financial stability. A new RBI Governor doesn’t necessarily mean a change in its policies. However, the opposition to crypto might dilute in the face of emerging realities including the past-faced developments in the stablecoin space. (IPA Service)
