According to Kaiko, a market research firm that released their report on Monday, Silvergate Capital’s closure of its widely used SEN service will likely positively impact the role played by stablecoins and those who issue them in cryptocurrency trading.
Closing SEN Can Boost Trading with Stablecoins
Last week, Silvergate announced a postponement of its annual report filing and advised potential inquiries from regulators. This served as an immediate red flag for digital asset firms that had relied on the bank’s SEN platform to transfer funds to their crypto exchanges – such renowned companies as Coinbase, Circle, Paxos, Binance.US., Galaxy Digital, and Gemini responding by suspending operations with Silvergate to safeguard themselves against any risk or damage.
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The Kaiko report stated that stablecoins might become even more widespread among traders with the passing of SEN. Instead of settling payments through banking rails to crypto exchanges in USD currency, it is projected that traders will convert their money into stablecoin forms and then transfer them over to these platforms. Nevertheless, there remains a potential risk as “stablecoin issuers still require access to a cryptocurrency bank, thus further concentrating this hazard.”
Stablecoins Replace Fiat Units in Cryptocurrency Trading
Stablecoins have become increasingly integral to the crypto market, with Tether’s USDT and Circle’s USDC taking over government-issued fiat currencies such as the U.S. dollar for cryptocurrency trading purposes worldwide. Kaiko data suggests that the role of dollars in this arena has been steadily decreasing; there were 326 new USD trading pairs created last year – a 20% decrease from 400 seen in 2021. Evidently, stablecoin usage is on an upward trajectory and could soon replace traditional currency altogether when it comes to digital asset exchange transactions!
According to the report, since the FTX crash, trading pairs utilizing USD have steadily declined compared to those with USDT, USDC, and Euro. For example, Kaiko’s data reveal that presently BTC has attained a record high of 93% dominance as against the U.S. dollar – an incredible transformation from 3% just three years ago! The report concluded by suggesting that while currently, dollars and stablecoins backed by them remain at the core of the cryptocurrency economy, disruptions in payment rails using USD could potentially disrupt this trend dramatically.
