Designed to solve the issue of volatility that may have held back the potential adoption of cryptocurrencies for everyday financial purposes, stablecoins provide less volatility for investors and traders compared with other types of cryptocurrencies as they are typically pegged to price-stable assets.
In 2019, Facebook — now Meta Platforms — announced project “Libra”, which was intended to be a universal currency tied to a basket of sovereign currencies such as the US dollar and the euro. Unsurprisingly, regulators and central banks were not too enamoured by the idea of a private company trying to muscle into what has been their much-cherished sovereignty of issuing a currency. A growing list of project partners began to get cold feet. As regulatory challenges mounted across multiple jurisdictions, the project, which was renamed “Diem”, ultimately met its demise early this year.
While project Diem never officially launched, many other stablecoins — or digital assets backed by a reserve of real assets such as fiat money — met the market and thrived over the years. Tether (USDT), for example, is the largest stablecoin in terms of market capitalisation, which stood at US$67 billion ($92 billion) as at Aug 18, followed by USDC at US$53 billion and Binance USD at US$18.2 billion.
