Stablecoins have become a valuable asset for many investors due to their stability during volatility and the power to act as a hedge against inflation. As these coins deploy blockchain technology with decentralization as a core feature, no external power can take over stablecoins and other cryptocurrencies.
However, government regulations over stablecoins have recently become a topic of discussion. Among these discussions are the key insights provided by Ki Young Ju, Founder and CEO of the on-chain analytics platform Crypto Quant.
In a recent X post, Ju has made it obvious that “dark stablecoins are likely to emerge in the future” due to heavy regulations from several governments.
What is a dark stablecoin?
As the name suggests, a dark stablecoin is a cryptocurrency pegged to fiat currencies such as USD, EUR, or a reserved asset that is anonymous, privacy-focused, and operates without regulatory oversight. Crypto itself indicates decentralization and autonomy, even though it faces a few regulations and restrictions from governments. When the identities of stablecoin and other cryptocurrency founders are known, dark stablecoin developers, unlike Bitcoin creators, hesitate to reveal their identities.
What did the CryptoQuant CEO’s prediction mean?
At the outset, Ki Young Ju stated that a cypherpunk community, which remains anonymous, created Bitcoin as a censorship-resistant asset. This prevents cryptocurrencies, including Bitcoin, from staying away from any centralized control.
On the other side, stablecoins are centralized as they are pegged to real-world assets and trusted companies. The CryptoQuant executive stated that stablecoins connect the digital world with the real world, therefore, they need someone to back them. As mentioned, the value of stablecoins remains stable because they are pegged to entities such as Tether and Circle. These institutions managed stablecoins by holding cash reserves in banks, wrote Ju in the post.
Worth noting, Ju said:
“Soon, any stablecoin issued by a country could face strict govt regulation, similar to traditional banks. Transfers might automatically trigger tax collection through smart contracts, and wallets could be frozen or require paperwork based on government rules.”
This adds to the reason why Ju predicted the rise of dark stablecoins. His insights also include that as the government regulations start evolving, people would step away from using stablecoins for big international transfers and might instead look for censorship-resistant dark stablecoins.
Two ways dark stablecoins could be created
So, Ju’s insights work on how stablecoins would be created: first, through algorithmic stablecoins that are not controlled by the government, and second, countries that issue stablecoins but do not choose to censor financial transactions.
He further pointed out an example of a decentralized stablecoin where these two ways could be implemented: a decentralized stablecoin holding the price of regulated stablecoins (USDC) using data oracles such as Chainlink to remain pegged without being controlled by a central body. However, a clear example of one such stablecoin is not yet known.
In Ju’s opinion, USDT (stablecoin of Tether) was once considered an uncensorable stablecoin, and if Tether refuses to comply with US government regulations under a “future Trump administration”, the coin would likely become a dark stablecoin, given that internet censorship increases. Importantly, Ju is bullish on the rise of dark stablecoins and their investment potential in the internet capital market.
