Stablecoins May Profit From Silvergate’s Struggles: Report

A brand new examine by digital asset knowledge supplier Kaiko has discovered that Silvergate’s resolution to close down its immediate funds community will probably increase stablecoin adoption amongst traders in crypto buying and selling.

Final week, Silvergate Capital introduced the closure of its funds community, SEN, which crypto exchanges and traders used to maneuver massive quantities of U.S. {dollars}. The choice got here after the crypto-friendly financial institution revealed in a regulatory submitting that it may quickly be “lower than nicely capitalized.”

Buyers May Flip to Stablecoin Issuers

Shortly after the announcement, crypto companies, together with Coinbase and Kraken, began abandoning the financial institution. Whereas Silvergate’s points could have an effect on crypto entities since entry to the worldwide banking system has all the time been a serious problem for them, Kaiko believes the “loss of life of SEN” will assist stablecoins “turn out to be much more ubiquitous amongst merchants.”

The examine predicts that slightly than depositing their {dollars} with an change utilizing banking rails akin to Silvergate’s SEN, traders will deposit them with a stablecoin issuer to obtain secure tokens earlier than shifting them to an change.

Nonetheless, Kaiko acknowledged that the stablecoin issuers will nonetheless want entry to a crypto financial institution, “so the chance is now additional concentrated.”

Stablecoins Acquire Market Share Towards the USD

With the rise of stablecoins, the variety of new fiat buying and selling pairs listed by crypto exchanges has declined globally. Final yr, the variety of new greenback pairs on exchanges dropped from 400 to 326, in keeping with Kaiko.

The report finds that for the reason that FTX implosion, the USD market share has declined persistently relative to USDT and USDC.

“For now, the greenback and dollar-pegged stablecoins stay the inspiration of the crypto-economy, however rising problems with USD fee rails may upend this pattern,” the report stated.

Stablecoins Proceed to Acquire Recognition

In the meantime, stablecoins have gotten very fashionable amongst merchants as they assist cut back volatility within the crypto market. A latest report revealed that stablecoins buying and selling quantity hit a brand new file excessive in 2022 at $7.4 trillion from $6 trillion within the yr prior.

The stablecoin market quantity has surpassed each main bank card supplier, together with Mastercard, American Specific, and Uncover, and was solely trailing Visa.