The negative news about bitcoin has provided a big opportunity for traditional institutions to push tokenized deposits.
Add to that the untrustworthy, peg-breaking status of so-called stablecoins, as well as the controversy surrounding FTX’s demise, and these banking-system-backed digital alternatives might be ready for prime time.
Recently, investors withdrew $3 billion from Binance, and the exchange stopped USDC withdrawals when a substantial number of customers began using the stablecoin. CoinDesk reported that Tron’s USDD stablecoin had plummeted to 97 cents.
In other FTX news, it was reported last month that Tether and Binance executives were texting FTX creator Sam Bankman-Fried, accusing him of attempting to depeg the USDT stablecoin.
The above examples show that stablecoins, which appear to be digital assets that “hold” value by being backed by currencies, might lose support at any time. TerraUSD plummeted to a low of a few cents early this year.
Trusted Issuers and Tokenized Deposits
As previously said in this space, the regulatory path ahead for banks to be the trusted issuer of stablecoins in a world where anybody may create a currency is long. (FTX was said to be working on one until October before going bankrupt.)
According to the US Office of the Comptroller of Currency (OCC), the coins will be created by fully regulated financial institutions (FIs) as early as 2020. This is a position shared by the President’s Working Group on Financial Markets. In a whitepaper published at the beginning of last month, the Clearing House declared that stablecoin issuance and related activities are the responsibility of banks.
