Stablecoins are a popular form of currency.
By focusing on payments, a raft of companies are preparing to take on industry giants such as USDT USDC and DAI.
Tether’s profitability is one of the reasons why it has attracted competitors. In the first quarter 2024, the company that created the most popular stablecoin made a net profit of over $4,5 billion.
Cold start is a difficult problem to solve. Top three stablecoins are widely supported on centralized exchanges as well as within DeFi.
Nick van Eck, the founder of Agora, wrote in a blogpost that they will share revenues generated by businesses who adopt their AUSD stablecoin.
And he expects the pie to grow — a lot.
Today, the global economy is worth approximately $150 billion. “we see [stablecoins] growing to $3T by 2030. Eventually, all other currencies will be digitized too, and FX trading will predominantly occur on-chain,” van Eck said.
While issuers’ profits have soared along with rising rates of interest, they are trying to attract customers by passing on a part of this yield to the holders. Maker introduced the Savings DAI concept (sDAI), which has since evolved by others.
van Eck, however, argues that the yield-bearing stabilitycoins will undermine their moneyness. “are security products” In the USA, and other countries.
“These products are likely to fall under securities legislation in other global markets,” van Eck said. “Not only does this deprive you of customers, it also deprives you of liquidity providers, vendors and a higher utility ceiling.”
Merchants do not have to accept the sDAI. Over the past few months, sDAI has done between $30-40 million in volume, per DefiLlama, thanks largely to DeFi integrations — it’s useful as collateral for instance — and its direct convertibility to DAI.
Gnosis Pay has recently signed a new partnership with Visa. The company issues debit cards that are directly linked to crypto assets through Safe.
Sam MacPherson CEO at Phoenix Labs and Co-Founder said that future integrations between Gnosis Pay and sDAI will enable users to programmatically replenish their card’s spendable balance if it drops below a threshold.
To do so, Gnosis Pay would swap sDAI — which can be best thought of as an on-chain savings asset — into the EURe stablecoin issued by Monerium, a licensed e-money token platform.
Sveinn Vallfells is the CEO of Monerium and told Blockworks that he agreed with van Eck’s position in general.
“Depending on their nature, yield bearing instruments mirror either bank time deposits or securities, they are not homogeneous and therefore not suitable for payments,” Valfells said.
He said that from a regulatory perspective, Europe has a head start on the US in terms of stablecoins. “is comparable to a standalone current account and which has been used for over twenty years by dozens of companies for online payments and prepaid cards.”
Maker’s recently launched Cash and Savings Interface automatically converts sDAI into specific DAI amount. There’s also no reason why this couldn’t be automatically done for EURe in order to remove the friction normally associated with yield bearing assets when used as a payment context.
Van Eck, of Agora, predicts that regulatory obstacles will be a major reason for this. “yield-bearing stablecoins will never be used as a means of transaction or payment at scale.”
Agora’s model assumes revenue sharing with businesses that mint AUSD will eventually flow to users and encourage adoption.
“Imagine a world where some applications take a small share of the income from Agora and use the majority to benefit users, creating a win-win situation where businesses thrive and users enjoy enhanced services and better user experience,” van Eck said.
Although AUSD will launch on Ethereum mainnet — which has the deepest liquidity — it will soon follow with a native launch on Sui, the parties said Wednesday.
Sui is one of the newest layer-1 fast-finish chains. It has been hampered by a dearth of natively-issued stablecoins. The chain relies on bridges to import multiple versions of USDC wrapped tokens.
In the coming months, there will be more competition. Stable[dot]Jack Jia and co-CEO Jack Jia announced USD3 during the Consensus Conference on Wednesday. “unique crypto-fintech stack” You can also find out more about the following: “streamline payments, USD access, trading and settlements, and more.”
It was not accompanied by any technical documents or information on the company’s differentiation from its incumbent competitors, except for an implied promise to cooperate with regulators.
“Stable[dot]com is a regulated financial institution in the US with a deep compliance program created by industry veterans,” Jia told Blockworks.
That stance indicates that it’s gunning for Tether, which has often been criticized — particularly in its early years — for playing fast and loose with AML policies.
To make a dent in the current stablecoin market, it will require more than venture capital and a well-known brand.
PayPal is a good example. Since August 2023 when it launched, the PYUSD stablecoin has generated $400 million, ranking it 12th in the world in this category.
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