The rise in DeFi protocols and the demand for tokens in liquidity pools can contribute to a large increase in the supply of stable coins.
According to a Tweet September 3rd from Co-Founder of Coin Metrics, Nic Carter, the current range of stable coins Binance USD (BUSD), DAI (DAI), HUSD, Paxos Standard Token (PAX), USD Coin (USDC), USDK, Tether (USDT), USDT_ETH and USDT_TRX have increased approximately $ 100 million a day for almost two months.
“Everyone was so excited about DeFi that no one noticed that stablecoins had added $ 100 million a day since mid-July.”, said Swamp. “DeFi yield / interest rates are clearly a loophole in many stable coins.”
Stablecoins are popular with tokens used in liquidity pools for DeFi protocols and appearing in increasing numbers this year. They offer high competitive returns to attract locked-up funds. DAI and USDC are also the most widely borrowed stablecoins in the Compound and Aave protocols.
However, Tether still has an 80% dominance over the stable coin market. According to CoinMarketCap Tether’s total market cap jumped from $ 9.2 billion on July 15 to over $ 13.7 billion today, a jump of nearly 50%. USDT trading volume rose around 150% from USD 21.9 billion to over USD 54 billion over the same period.
The supervisory authorities are also gradually taking note of this. Andrew Bailey, Governor of the Bank of England, said that today Stablecoins could offer some “useful benefits” to UK investorsFor example, to reduce friction in payments, but to point out that currencies “must have standards equivalent to those that exist today for other forms of payment and the forms of money they transfer”. Bailey also pointed out the need for coordinated international regulations for stable coins:
“A global stablecoin is a cross-border phenomenon. It can be operated in one jurisdiction, denominated in another currency, and used by consumers in a third. The regulatory response must match this.”