The stablecoin issuer Tether has minted $1 billion worth of USDT on the Tron network. Meanwhile, the stablecoin business model's sustainability is being doubted due to competition with traditional banks and unsupportive regulations.
Tether and Its Business Model
Tether has recently minted $1 billion worth of USDT tokens on the Tron network. In total, Tether has added $13 billion worth of USDT to both the Ethereum and Tron platforms since October 2023. But, the newly minted tokens on Tron are not available for transactions or swaps yet. CEO Tether Paolo Ardoino said that the newly minted tokens are intended for future needs rather than current circulation.
However, the massive minting of USDT often correlates with bullish sentiment in the cryptocurrency market. This moves leading to speculation about potential rebound in cryptocurrencies.
According to Coinmarketcap data, current crypto market capitalization has increased by +2.48%. Some popular cryptocurrencies are seen rebounding, such as Tether (+0,01%), Bitcoin (+2,61%), Ethereum (+1,71%), Solana (+7,10%), and Cardano (+8,17%). However, the rebound of certain cryptocurrencies may not necessarily be caused by Tether's action.
Look at Tether's market capitalization, which has reached $95 billion at present. Tether's market capitalization has been steadily increasing since early 2023. Tether (USDT) has successfully strengthened its dominance in the stablecoin market with a valuation almost reaching US$100 billion, or approximately 69.69% of the total stablecoin valuation.
This growth may be part of the positive impact from the BUSD controversy over 2023. When the SEC sued BUSD, most investors began shifting to USDT, causing a significant increase in its market capitalization.
Also, the collapse of three giant crypto entities namely Terraform Labs, Three Arrows Capital, and FTX. These major crypto disasters led USDT to a firm position and broad acceptance among cryptocurrency users.
Arthur Hayes: Big Banks Could Replace Tether's Business Model
Amid Tether's success story over the past year, a popular figure in the crypto world known as Arthur Hayes made a surprising statement. In a recent interview with Unchained’s Laura Shin, Hayes predicts significant changes in the stablecoin industry, especially for companies like Tether.
He said that big banks, like JPMorgan, could replace the existing stablecoin providers once they receive authorization to issue their own fiat-backed stablecoins.
"Stablecoin issuers don't have any defensible business because they use banks to custody their funds, which allows them to trade debt instruments," said BitMEX CEO and founder Arthur Hayes in early January 2024.
Hayes highlights Tether's current business model is in vulnerable mode. He said that Tether most likely relies on banks for clearing and custody services. In his opinion, stablecoin companies lack a defensible business model compared to banks. Hayes noted the dependent aspect from stablecoin companies. Once again, Hayes said that the regulatory landscape plays a crucial role for the future of stable coins.
Stablecoin Regulation in the US
Currently, there is no comprehensive regulation for stablecoins worldwide, including the US. US regulators are most likely to implement very strict policies for the crypto industry, including stablecoins.
An updated version of the bill concerning stablecoins was reintroduced in the Senate in July 2023. The revised bill specified that stablecoins would fall under the jurisdiction of state and federal bank regulators. It emphasized that stablecoins would be issued by depository institutions. It also means that stablecoin is not categorized as commodities or securities.
However, the timeline for regulatory changes that allows banks to issue fiat-backed stablecoins is still uncertain. So, investors and crypto companies are seen in a wait-and-see mode.
Some crypto players saw there might be regulatory changes ahead of the elections. The upcoming US presidential election could be crucial in shaping regulatory policies for blockchain and cryptocurrency (including stablecoin).
In the United States, the political scene reflects diverse opinions on digital currencies, particularly central bank digital currencies (CBDCs). Popular figures like GOP candidate Donald J. Trump and independent runner Robert F. Kennedy expressed skepticism about CBDCs, citing concerns about civil liberties.