Featuring:
Martha Bennett, Vice President and Principal Analyst, and Peter Wannemacher, Principal Analyst
Show Notes:
Prices for Bitcoin and other cryptocurrencies spiked following Donald Trump’s US presidential win in November as the incoming administration signaled a friendlier posture than its predecessor toward the crypto industry. Meanwhile, payments giant Stripe’s recent acquisition of the stablecoin startup Bridge marked a greater fintech push into crypto. Where is cryptocurrency headed? And what can we expect in terms of regulation? This week, Vice President and Principal Analyst Martha Bennett and Principal Analyst Peter Wannemacher address these questions and break down the various types of stablecoins and their levels of risk.
The conversation starts with Bennett discussing the current state of cryptocurrency regulation. While regulatory clarity in the US has been lacking, the European Union’s Markets in Crypto-Assets (MiCA) regulation sets guardrails for cryptocurrencies and protections for consumers. In the US, Bennett adds, the Trump presidency may bring clarity, though “the regulatory clarity that’s wanted by the industry may not be what the EU regulations are giving them, because there are some quite restrictive elements to that.”
The discussion then shifts to types of stablecoins, sometimes described as “cryptocurrency stripped of speculation” (a description that is not entirely accurate, Wannemacher notes). Bennett then describes stablecoin types ranging from algorithmic coins (such as TerraUSD and LUNA, which famously crashed in 2022) to commodity-backed coins to J.P. Morgan’s deposit tokens, which are one-to-one representations of cash in an escrow account. “[Stablecoins] are differently constructed, and that gives them different risk levels,” she says, adding that, for this reason, regulation and greater transparency are needed. (For a deeper dive into stablecoins, check out Bennett’s latest blog post.)
The conversation then shifts to potential practical uses of cryptocurrency. Wannemacher cites Forrester survey data from 10 countries showing that, in all but three of those countries, consumers gave digital currencies the lowest score in terms of perceived usefulness. “We see growth in use of stablecoins for, let’s say, cross-border payments, but it’s from a very small base,” he says. But “as of now, our data shows clearly that most people are not interested in this.”
Later on, the analysts touch on central bank digital currencies. The episode closes with Bennett providing her insight on the best way to monitor the risks associated with new cryptocurrency policies, so be sure to stick around for that.