The characteristics of the ideal stablecoin

Written by Iain Monk Digital Asset Strategy Lead at Clear.Bank

Stablecoins have made great strides since the first stablecoins (BitUSD and Bubits) which were created back in 2014 and, as the name suggests, designed to be “stable” (i.e. not volatile) - unlike other crypto currencies. They were created to have a return similar to the US$ and were backed by a basket of cryptos.

Tether (USDT) is the largest stablecoin out of over 200 that now exist and is considered the world’s first true stablecoin that is predominately, but not exclusively, backed by US$ deposits. Stablecoins themselves have proved to be very profitable for the issuers as can be seen by Coinbase, which reported $146million of income from its part ownership of USDC in Q4 2022. Even greater was the $1.44billion which Tether earnt in the first quarter of 2023; the reason these stablecoins are generating so much income is that they typically do not pay the owners any share of the interest that is earned from the bank deposits and other collateral that backs these stablecoins. PayPal rec…