2020 will be remembered as the year COVID-19 unexpectedly transformed many facets of our daily lives. As people were made to limit their physical interactions and spend most, if not all, of their time confined to their homes, reliance on technology has reached a point previously unseen, leaving us on the verge of a new digital revolution.
As a result, 2021 is shaping up to be the year we witness governments and financial institutions discard their resistance to changing the status quo and instead commit to the digital evolution of payments.
However, for there to be widespread acceptance of novice currencies, we must overcome the primary hurdle of convincing people that they are more secure than most think. This is where blockchain technology steps in to provide skeptics with more reassurance.
Digital coins have provided investors with opportunities of generating exponential returns as well as alternative investment vehicles. While the benefits have ranged from increased security, transparency, and reliability, the highly volatile nature of some cryptocurrencies is the leading factor prohibiting them from being widely accepted and used in the same vein as traditional currencies.
While the advent of stablecoins was expected to ease volatility concerns, its adoption came at a considerably slower pace than anticipated. The global pandemic, however, has acted as a catalyst and is having a significant impact on the adoption of stablecoins.
For one, the pandemic led many to realize that the current financial structure is too reliant on legacy systems that fail to adequately meet the needs of its users. More so, the increase in international transfers during the time of lockdown has created the need for a more transparent, cost-effective, and efficient cross-border transfer system than that afforded by the current systems.
The concept and structure of stablecoins make them a natural fit to meet these requirements and that is why they have garnered the attention of major institutions, especially over the past year.
A prime example of the shift in sentiment is the recent news involving the U.S. Treasury and stablecoins. The Office of the Comptroller of the Currency (OCC), the bureau of the U.S. Treasury Department responsible for regulating banks, has stated that banks may use stablecoins and blockchain technology for payments.
The acting Comptroller of the Currency, Brian Brooks, stated that “our letter removes any legal uncertainty about the authority of banks to connect to blockchains as validator nodes and thereby transact stablecoin payments on behalf of customers who are increasingly demanding the speed, efficiency, interoperability, and low cost associated with these products.”
This letter, which was issued by the OCC and available on its official website, also allowed banks to issue stablecoins and exchange them for fiat.
The acceptance and recognition of stablecoins as a more efficient payment mechanism by one of the world’s largest bank regulators serves as evidence of what the future of payments may look like. To learn more about stablecoins, check out our previous post here.
