Stablecoins steal the limelight from subdued bitcoin

The representation of the cryptocurrency bitcoin is seen in this illustration taken on November 29, 2021. REUTERS / Dado Ruvic / Illustration / File photo

Dec 13 (Reuters) - As bitcoin, the world's largest cryptocurrency, struggles to recover after a massive collapse, the regulatory and private sector focus has turned to another part of the digital currency world: stablecoins.

Last week saw Meta Platforms Inc (FB.O) pilot your stablecoin payments briefcase, while Visa, the world's largest payment processor (VN)thrown out a crypto advisory service and such stablecoins could become the medium of exchange instead of cryptocurrencies.

Stable currencies are a form of virtual currency with values ​​pegged to traditional assets such as the US dollar or commodities, and their rise has accelerated discussion by central banks around the world about the digital versions of their currencies.

Analysts at the digital platform Alkemi Network were among those who hailed Visa's move as evidence that the cryptocurrency and decentralized finance ecosystem is moving toward maturity.

"Making a visible attempt to play by traditional financial rules is definitely gathering momentum as a movement within the crypto ecosystem," they wrote.

Japan's financial regulator said last week that it will draw up rules in 2022 to restrict the issuance of stablecoins to banks and wire transfer companies.

In the United States, including as top executives of major cryptocurrency companies, including Coinbase (COIN.O) and circle urged Congress to provide clearer, tailored rules for the industry, Treasury Secretary Janet Yellen and a group of bank CEOs discussed the need to regulate stablecoins.

Meta's cryptocurrency wallet Novi will allow users to send and receive money through the social media giant's WhatsApp messaging app and will use a stablecoin called Pax Dollar.

Research platform Delphi Digital says stablecoins have grown substantially in the last month, with the market capitalization of the top five stablecoins rising to nearly $ 150 billion from $ 129 billion. Tether, the largest stablecoin, has a market value of $ 76 billion.

Meanwhile, the central banks of Switzerland and France claimed to be successful in Europe's first cross-border test of central bank digital currency (CBDC) payments, after testing the project. Swear, named for the mountains between the two countries.

BARGAIN HUNTERS

With bitcoin capped at $ 50,000 for most of the week since its sudden crash on December 4, the market capitalization of the 15,541 coins on the CoinMarketCap platform stood at $ 2.25 trillion compared to $ 2, 6 trillion at the beginning of December.

Cryptocurrencies have benefited from easier cash conditions even in a higher inflation environment, but it was hard to say what would happen when the Federal Reserve accelerates tightening or prepares to raise rates, said Chris Weston, head of research at the Pepperstone broker in Melbourne.

"I feel like there will be headwinds, but as always with crypto, the only thing you can have is an open mind," Weston said.

Bargain hunters have emerged. The number of active bitcoin addresses reached 1 million after the collapse, according to a report by Arcane Research, the highest since the cryptocurrency plunged 35% in May.

"The sleeping holders of bitcoins appear to have been woken up by volatility," Arcane analysts said.

One notable dive shopper was MicroStrategy Inc, led by Michael Saylor (MSTR.O), which added 1,434 bitcoins to its holdings for around $ 82.4 million, the company said last week.

However, the number of bitcoin wallets with more than 1,000 tokens fell during the week, which could indicate profit-taking among the largest players, Kraken Digital reported.

Cryptocurrencies topped the list of assets expected to see a correction in 2022, according to a survey of 500 global institutional investors by Natixis Investment Managers.

Another Visa survey showed that 40% of global crypto owners would likely switch their main bank to one that offers crypto-related products in the next 12 months.

The Natixis survey showed that only 4 out of 10 institutions considered cryptocurrencies as a legitimate investment option although, of the 28% who already invest in cryptocurrencies, 90% expect to maintain or increase their allocation in 2022.

Reporting by Lisa Pauline Mattackal in Bengaluru and Vidya Ranganathan in Singapore; Edited by Alison Williams

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