According to Chainalysis’ report, despite the initial efforts by U.S. entities to legalize and build the stablecoin market, an increasing number of cryptocurrency users are engaging in stablecoin-related activities with trading platforms and issuers based overseas.
Chainalysis notes that stablecoins have accounted for over 50% of the total online transaction volume on centralized exchanges in recent times. The report highlights:
Data from blockchain analysis shows that over half of the total transaction volume on-chain to or from centralized services from July 2022 – June 2023 occurred with stablecoins.
During this period, most of the funds from stablecoin transactions flowed from U.S.-licensed services to foreign-based services.
By June, 54.6% of stablecoin funds flowing to the top 50 services would be headed to non-U.S. exchanges.
However, the report also emphasizes that a majority of stablecoins are linked to the U.S. dollar. Furthermore, it underscores the significance of government regulatory caution:
More than 90% of stablecoin activity occurs with stablecoins pegged to the U.S. dollar. U.S. regulators are very concerned about managing stablecoins due to the central role of the USD reserve for these assets.
Meanwhile, Jason Somensatto, Head of North American Public Policy at Chainalysis, acknowledges the certain complexities involved in stablecoin regulation. However, these issues are expected to be addressed in the near future:
These debates are resolvable and need to be addressed soon because of the global competitive interests and necessary regulations.
This development comes after the U.S. House Financial Services Committee released a draft bill on stablecoins on April 15. The proposed bill suggests several changes, including temporarily halting algorithmic stablecoins and giving control over stablecoins from non-bank companies to the Federal Reserve.
According to DefiLlama, the total market capitalization of stablecoins currently stands at $124.56 billion. Tether (USDT) dominates with a significant market share of 67.6%. On September 22, BeInCrypto reported that new data revealed the stablecoin market capitalization had dropped to $124 billion in September, the lowest since August 2021.
However, among the 118 stablecoins, BUSD and FRAX have seen the most significant declines among the top 10 by market capitalization. BUSD’s market capitalization decreased by 19.2% to $2.5 billion. Meanwhile, FRAX witnessed a 16.7% decrease, resulting in its market capitalization dropping to $670 million.
Chainalysis’ report highlights the ongoing evolution and regulatory challenges in the stablecoin market, which continues to play a significant role in the cryptocurrency space.