Thoughts On Stablecoins, Borrowing & Lending Platforms, Earning Yield, Leverage, Risks, & Regulation

In this Crypto Weekly, instead of discussing our usual views on the market, we’re going to talk about something a little different – our thought on stablecoins, borrowing & lending platforms, earing yield, leverage, risks, and regulation.

We think it’s worth discussing these areas to expand on our notes from last Friday and Monday on leverage in the crypto lending space and given the House Financial Services Committee holds a hearing on Crypto today.

Source: C-SPAN

Why do stablecoins matter in crypto?

Stablecoins are becoming a big part of the crypto economy with the total value of stablecoins outstanding now at ~$108B. These digital assets offer a lot of innovation and are enabling new use cases on top of them.

Source: The Block

Are stablecoins digital dollars or digital debt?

Most think about stablecoins as digital dollars. The reason is because these assets (pegged stablecoins only; crypto backed and algorithmic are different) are usually backed by dollars as collateral held by the issuer at a regulated bank.

But we think these assets look a lot more like digital debt than digital dollars in a few ways. In the finance world, these instruments somewhat resemble debt with the following illustrative terms: