Stablecoins could benefit from Silvergate’s struggles: report

A new study by digital asset data provider Kaiko has found that Silvergate’s decision to shut down its instant payment network is likely to boost stablecoin adoption among crypto trading investors.

Last week, Silvergate Capital announced the closure of its payments network, SEN, which crypto exchanges and investors used to move large amounts of US dollars. The decision came after the crypto-friendly bank revealed in a regulatory filing that it could soon be “less than well capitalized.”

Investors can turn to stablecoin issuers

Shortly after the announcement, crypto companies including Coinbase and Kraken began exiting the bank. While Silvergate’s issues could affect crypto entities as access to the global banking system has always been a major challenge for them, Kaiko believes the “death of SEN” will help stablecoins become “even more ubiquitous among traders”.

The study predicts that instead of depositing their dollars into an exchange using bank rails like SEN from Silvergateinvestors will deposit them with a stablecoin issuer to receive stable tokens before moving them to an exchange.

Nevertheless, Kaiko stated that stablecoin issuers will still need access to a crypto bank, “so the risk is now further concentrated.”

Stablecoins are gaining market share against the USD

With the rise of stablecoins, the number of new fiat trading pairs listed by crypto exchanges has decreased globally. Last year, the number of new dollar pairs on exchanges fell from 400 to 326, according to Kaiko.

The report finds that since the FTX implosionmarket share in USD has consistently declined against USDT and USDC.

“For now, the dollar and dollar-pegged stablecoins remain the foundation of the crypto economy, but increasing complications with USD payment rails could reverse this trend,” the report said.

Stablecoins continue to gain popularity

Meanwhile, stablecoins are becoming very popular among traders as they help reduce volatility in the crypto market. A recent report revealed that stablecoin trading volume hit a new all-time high in 2022 at $7.4 trillion from $6 trillion in the previous year.

Stablecoin market volume surpassed all major credit card providers, including Mastercard, American Express, and Discover, trailing only Visa.

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