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Coinbase(NASDAQ: COIN), one of the world’s largest cryptocurrency exchanges, recently partnered with Moov, a payments infrastructure provider, to bring stablecoin payments and settlements to more than 1,000 U.S. community banks and credit unions. By integrating Coinbase’s digital asset infrastructure into Moov’s payments platform, the two companies will enable those financial institutions to accept stablecoins without building their own blockchains.
Let’s see how this partnership could help Coinbase, why everyone is talking about stablecoins right now, and how the upcoming vote on the CLARITY Act could impact those plans.
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Why is Coinbase investing in stablecoins?
Stablecoins are cryptocurrencies pegged to a stable fiat currency, such as the U.S. dollar or the euro, and can be held without a bank account. Their payments can be settled 24/7, enabling faster, cheaper money transfers than fiat currencies. They can be deposited in third-party lending platforms and liquidity pools to earn higher yields than traditional bank accounts.
Stablecoins can also allow people in countries with hyperinflation to preserve their savings without buying the underlying fiat currencies. They can also be used to accelerate cross-border transfers by acting as a “bridge currency” between the two fiat currencies.
Stablecoin issuers, such asCircle (NYSE: CRCL), earn interest on the cash and Treasury reserves they hold at banks and other financial institutions to back their tokens. Circle co-developed its stablecoin, USD Coin (CRYPTO: USDC), with Coinbase in 2018. As part of that partnership, Coinbase retains all reserve income from the USD Coins held on its platform.
Coinbase now generates nearly a quarter of its revenue from those stablecoin reserves, and that steady growth partly offsets the volatility of its other cryptocurrency trading fees. The more stablecoins are minted and held, the more reserve income will flow to Coinbase’s coffers. That’s why Coinbase is keen to work with Moov to introduce stablecoins to more financial institutions.
Why is everyone talking about stablecoins now?
Cryptocurrency exchanges like Coinbase are embracing stablecoins, but traditional megabanks consider them a threat to their fiat-based savings accounts. That clash has prevented the CLARITY Act, which aims to establish a clear federal framework for regulating digital assets, from passing the Senate after it was approved by the House of Representatives last July.
Source: finance.yahoo.com