For a decade, fiat-backed stablecoins have underpinned the growth of the crypto sector, enabling on-chain finance and aiding those without traditional bank access. These stablecoins have not only helped temper volatility and increase liquidity, but they have also become the most democratized use case in crypto finance. They significantly contribute to the development of on-chain financial activities, facilitate payments for unbanked populations, and offer protection against local currency inflation.
After 10 years of growth, fiat-backed stablecoins have established themselves as the best form of crypto dollars. They dominate the market, having achieved a network effect mainly thanks to the exchange platforms to which they are connected.
Institutional and retail users, favoring simplicity and reliability, have demonstrated that they predominantly prefer to use a dollar to support a crypto-dollar. Without questioning the major advance that decentralized stablecoins represent, the market has chosen this path and this should be reinforced with the surge of liquidity coming from traditional finance in the coming years.
However, the current models are not perfect and are likely to fall short of fully satisfying both everyday users and institutional actors, especially when it comes to onboarding trillions of assets from traditional finance.
Centralized stablecoin issuers are private cash machines
Centralized stablecoin issuers, like Tether and Circle, which represent about 90% of the stablecoin market, have become heavyweights in the world of crypto, with valuations and profits that defy traditional financial giants such as JP Morgan and BlackRock.
Their business model is straightforward: they use the liquidity that backs the stablecoin to support varying levels of risky products.
Consequent to the increase in monetary interest rates, these entities have transformed into lucrative 'cash machines', with Tether's operations alone generating over 4 billion dollars in revenue in 2023, bringing its hypothetical valuation close to the 100 billion dollar mark.
Every day, millions are transferred from cryptocurrency holders to traditional finance or private individuals. Circle's planned IPO in 2024 illustrates this gap, as it plans to offer traditional investors the opportunity to benefit from USDC revenue without directly assuming the associated risks of holding the stablecoin. This arrangement places the risk burden on crypto users, while traditional investors can capitalize on the benefits. Such a dynamic not only intensifies control over the transparency and ethics of centralized stablecoins, but also raises questions about the fair distribution of financial outcomes in this merging landscape of traditional finance and crypto.
Centralized stablecoin issuers are banks
Cryptocurrency promised a financial revolution—a decentralized architecture that returns value and power to its contributors, placing the individual at the heart of monetary discourse. Yet, this transformative promise remains largely unfulfilled. Fiat-backed stablecoins mirror the very banking mechanisms they were intended to challenge.
Fiat-backed stablecoins essentially mirror traditional banks. They privatize profits and socialize losses. The only difference is that they currently cannot utilize institutionalized fractional reserve banking as we know.
Moreover, their liquidity in commercial banks ties them to systemic risk in the cryptocurrency ecosystem as seen in cases like SVB.
The regulator often highlights the potential threats that stablecoins can represent for the global financial stability of the traditional system. The paradox, however, is rather the reverse. Through their exposure to the bank balance sheet, fiat-backed stablecoins constitute a permanent Damocles sword of the traditional banking system on cryptocurrencies.
More generally, the essence of cryptocurrency, as a means to shift value back to its contributors and place individuals at the center of monetary discourse, remains overshadowed. The aspiration for currency to become a public entity, a res publica, is yet to be realized. Current models, although innovative, continue to operate within the confines of traditional financial systems, underlining the need for a reformation that truly aligns with the ethos of common good over capture gain, and ensures the fundamental values of cryptocurrency are not only preserved but also prioritized.
The ideal of decentralization has been compromised by the adoption of practices reminiscent of the traditional banking system, where autonomy is curtailed, and transparency is often clouded by complex financial engineering. The narrative of cryptocurrency as a liberating force for financial sovereignty is at a crossroads, facing the challenging task of reconciling the innovative potential of digital assets with the entrenched interests and mechanisms of the existing financial order. This juncture calls for a concerted effort to reclaim the visionary principles of the cryptocurrency ethos, where the power of financial systems is genuinely democratized, allowing for a market that not only innovates but also elevates the standards of autonomy and transparency for all participants.
It’s time to untether.
It's time for a paradigm shift. It’s time to really untether from the old world. This transformation requires us to advocate for public infrastructure, transparency, neutrality, and a fair distribution of value, ensuring that stablecoins evolve into a standard, everyday utility—'usual' in the truest sense.
Usual is a universal entry gate in this new stablecoin and value sharing paradigm; it's an alternative to traditional finance and banking. Its goal is to uphold the core values of fairness, autonomy, and transparency in the crypto world while remaining ultra profitable.
Usual is part of a comprehensive reform of basic financial principles, reviving the initial ethos of cryptocurrency. This ethos guarantees everyone the right to own financial institutions and maintain their individual sovereignty, receiving a fair portion of the value they contribute to this new world.
Join us in this transformative journey. Embrace Usual as the embodiment of change, where the decentralization of finance isn’t just a promise but a reality. Together, let's step into a future where finance is accessible, transparent, and equitable for all. Join the Alternative.
By reading our story, you'll discover day by day what the alternative, what Usual, truly is. 🔮
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