Reeve Collins, the founder of blockchain neo-bank WeFi, stated that the number of viable stablecoins will increase as AI agents and account abstraction simplify management for users, who will no longer need to actively manage decentralized finance operations or execute complex trading strategies to generate yield. Collins informed Cointelegraph that the demand for yield-bearing assets such as synthetic dollars, algorithmic stablecoins, and other next-generation real-world assets will rise as user experiences become more simplified, thereby creating a vibrant ecosystem of products.
Once the technical barriers to entry are lowered, these yield-bearing instruments will vie for investor attention due to their ease of use and the yield opportunities they present. Collins remarked, “When the application layer gets a little more mature and when AI is integrated, all of the complexity in this space will be gone. Then the only thing that will drive which token to use is which one makes you the most money, which one is the easiest to use.”
Most crypto users currently depend on traditional, overcollateralized stablecoins backed by fiat cash or short-term cash equivalents that offer no yield and maintain the fundamental characteristics of the underlying fiat reserves.
Stablecoins come under regulatory scrutiny
Despite efforts to promote overcollateralized stablecoins as a means to extend US dollar dominance, government regulators still perceive this nascent asset class as a potential threat to the existing financial system. On December 6, the United States Financial Services Oversight Council (FSOC) published a report outlining systemic risks associated with stablecoins. The authors contended that overcollateralized stablecoins are susceptible to withdrawal runs due to insufficient risk management policies.
Coinbase recently delisted Tether’s USDt (USDT) stablecoin in the European Union to remain compliant with the EU’s Markets in Crypto-Assets (MiCA) regulatory framework. A Coinbase spokesperson informed Cointelegraph that the exchange will reassess its stablecoin listings at a later date and may relist assets that have achieved MiCA compliance. Unsurprisingly, a recent report from Kaiko indicates that MiCA-compliant stablecoins dominate the European market, with stablecoin issuer Circle commanding approximately 91% of the stablecoin market share in the region.