Stablecoins in Cryptoeconomics: From Initial Coin Issuance to Central Bank Legal Digital Currency -Part 5

2. The financial relationship between stablecoins and other cryptocurrencies

Blockchain has systematic characteristics. Therefore, the market value of cryptocurrencies is always consistent. In this context, stablecoins that are linked to fiat currencies and may benefit from the existence of collateral may break the interconnection between cryptocurrencies, especially the dependence on Bitcoin.

In addition to the financial impact, the interconnection between cryptocurrencies (including stablecoins) and Bitcoins also has an impact on transparency. The role of Tether in the Bitcoin bubble in 2017 is a good example.

When a stable currency was decided to launch, the issuer and the cryptocurrency exchange may have a significant conflict of interest, because the exchange may gain advantages and profits from the conversion of fiat currency and cryptocurrency. It also explains why cryptocurrency exchanges are increasingly launching stablecoins on their own platforms.

This situation has raised questions about the opportunity for cryptocurrency exchanges to “own” a stablecoin and list it, which has forced regulators to act accordingly. These actions should be conducive to reducing conflicts of interest, while strengthening the basic function of exchange and protecting the collateral of stablecoins, helping to maintain market integrity and strengthen investor protection in the context of cryptoeconomics.