Tokens associated with decentralized stablecoin protocols have benefited in the last 24 hours as a result of problems with Paxos’ BUSD offering.
Curve’s (CRV) token has risen 11% in the last 24 hours, reflecting increased market demand for decentralized stablecoins.
While Curve does not yet provide native stablecoins, the impending curve USD (crvUSD) currency is eagerly anticipated in crypto communities. Curve’s plans to launch a dollar-pegged asset were first reported by CoinDesk in June.
On Monday, Curve appeared to foreshadow the impending launch of crvUSD, claiming that an ongoing proposal will be “needed for crvUSD to function autonomously.” The continuing proposal would allow stablecoin pools to transmit pricing data to external protocols.
This likely acted as a trigger for traders, as demand for CRV increased and the tokens saw over $770 million in trading activity on cryptocurrency platforms.
Curve focuses on smart contracts instead of middlemen to deliver financial services such as stablecoin borrowing, trading and lending to users. Curve depositors can earn annual rates of up to 4% from one of the platform’s various pools.
It is one of the most popular and prominent protocols among the crypto world and locks up $4.6 billion worth of tokens.
CRV traded over $1 on Tuesday, reaching early-January levels and bucking an overall market downturn as bitcoin (BTC) shed 1%. The move occurred as tokens tied to decentralized stablecoins become the latest driver of crypto markets.
As per a WSJ story on Sunday, the U.S. Securities and Exchange Commission (SEC) Sunday contends that BUSD is unregistered security. The disclosure came days after CoinDesk previously reported Paxos is under investigation by the New York Department of Financial Services, however the breadth of NYDFS’ probe is unclear.
This prompted unfavorable sentiment for centralized stablecoins such as BUSD, with traders presumably looking for decentralized counterparts which will be less likely to suffer legal implications in the future.
Decentralized stablecoins are backed by a basket of cryptocurrencies in order to be pegged to a fiat currency, most commonly US dollars. They can be algorithmic, in which another token is generated and regularly minted or burned to assist maintain the stablecoin’s peg, or overcollateralized, in which the basket of assets is considerably in excess of what is required to support a stablecoin’s net circulation.
“The crvUSD might be a really intriguing development, given we haven’t yet seen a stablecoin issued by a large DEX,” (decentralized exchange) Daniel Zlotin, senior DeFi developer at Orbs, explained to CoinDesk in a Telegram chat.
“Connecting a stablecoin with a viable [decentralized finance] platform could open up some interesting possibilities in terms of new models (such as using LP tokens as part of the backing system),” Zlotin continued, cautioning that there would “definitely be some challenges” in putting such a concept into action.
