Matt Hougan, chief investment officer at Bitwise, says traditional finance (TradFi) stablecoins created by established financial institutions might have trouble attracting notable market acceptance.
“TradFi stablecoins will find it harder than they think to win market share,” Hougan remarked in an X post dated February 26.
Hougan cited the recently revealed stablecoin proposals by Bank of America (BofA) CEO Brian Moynihan, who on February 25 said BofA would probably introduce a US dollar-pegged stablecoin Once regulators developed relevant legislation.
Soon after the news about the BofA stablecoin, Jeremy Allaire ‘co-founder of Circle’ the issuer of the second-largest stablecoin, USDC argued that all USD stablecoin issuers should be registered in the US.
Stablecoins as New CBDCs?
The BofA stablecoin news set off conflicting responses from the community: many saw it as a positive indication of crypto acceptance, while others saw bank-issued stablecoins as a new form of central bank digital currencies (CBDC).
“So are they going to simply “rebrand” CBDC’s and call them “stablecoins?” One X user commented.
“Sounds CBDCish,” said still another industry observer.
Other members of the community disagreed, stressing basic differences between a possible BofA-issued stablecoin and a CBDC.
“There is a basic difference. Whereas a stablecoin is the liability of the issuer, a CBDC is the direct liability of the central bank. This has enormous ramifications, Anderson, a digital asset researcher noted.
Community worries about the US CBDC “rebranding” to centralized US dollar-pegged stablecoins could coincide with the new US approach of increasing the US dollar with the aid of stablecoins.
US President Donald Trump signed an executive order on January 23 promising to uphold the sovereignty of the US dollar “including through actions to promote the development and growth of lawful and legitimate dollar-backed stablecoins worldwide.”
On the other hand, the order stopped the US from the development of CBDCs in the US.
The Community Fears Tether Will Be Illegalised
Some in the community voiced worries about possible effects on Tether, the most valuable stablecoin by market capitalization, amid BofA news.
“The US will probably ban or handle Tether differently from other stablecoins because of this.” One person who commented said that they are pushing for this.
It was Tether CEO Paolo Ardoino who spoke on X on February 26 about a tweet by Rumble founder and CEO Chris Pavlovski. He called the new legal developments in the US for stablecoins “very troubling.”
“I have a strong feeling that this toxic stablecoin legislation is damaging confidence in crypto and negatively impacting Bitcoin price,” Pavlovski wrote. The draft laws, he further said, aim to kill competition in the stablecoin market.”
Ardoino told Cointelegraph earlier that Tether promotes rivalry in the stablecoin market but does not want to challenge US and European stablecoin issuers.
“Our focus has to be where we are most needed,” he said, noting that developing nations like Argentina, Turkey, and Vietnam most demand Tether.
