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Tether tops the list on institutional usage despite ongoing backing irregularities




Source: Unsplash

No matter which way you look at it, Tether will always occupy center stage while Bitcoin is in the limelight following its price surge. With the collective community noticing a trend in the market capitalization of USDT and the price rise of BTC, coupled with the slew of controversies surrounding the stablecoin, one key part of the cryptocurrency market is unfettered, the institutional investors.

In a recent study by Binance Research, the exact nature of this institutional-stablecoin adherence was laid out, with USDT, unsurprisingly taking the top spot on the ladder. The research wing of the largest and most reputed cryptocurrency exchange in the world queried institutional and VIP clients in May 2019, to gauge their perspective and usage, or lack thereof, on the stablecoin market.

Prior to listing out the findings of the study, it is imperative to note that 90 percent of the clients in the poll stated that USD was employed as their “benchmark currency,” and hence USD denominated stablecoins and USD-denominated platforms would, naturally, dominate the fray.

Source: Binance Research

The report stated that “nearly all” of the queried institutional and VIP respondents use stablecoins either as a store of value, USD in digital form or as a means of trading, given the number of crypto-stablecoin trading pairs that are in the market. Called the “go-to stablecoin,” in the report, USDT found itself in the operations of over 80 percent of the clients queried.

Coming in an expected second was the Coinbase and Circle spearheaded stablecoin USD Coin [USDC] which was used by 45 percent of the respondents, given the big-name backing of the same. The report added that USDC found significant usage with their non-Chinese base, on one hand. On the other, the Chinese clients of Binance flocked towards Paxos Standard [PAX], which took third, accounting for 25 percent of the usage.

A key finding of the report stated that some clients were thinking of switching out of USDT and into other stablecoins, offering similar liquidity. The report read,

“However, a few clients indicated that they were currently looking for alternatives for USD Tether (USDT) with similar liquidity profiles.”

The fifth most used stablecoin on the clients’ list was Maker’s DAI, the cryptocurrency collateralised stablecoin operated on the Ethereum blockchain, which saw usage on one-fifth of the institutional clients’ operations.

USDT has, in the past been accused of “fractional banking,” because of its alleged skewed one-for-one backing with the USD. Additionally, its inner workings, with reference to the convoluted Bitfinex-iFinex-Tether matrix, has also drawn criticism, especially earlier in the year when Bitfinex was accused of fraud by the New York Attorney General’s office for covering up an $850 million undisclosed loss using Tether.

Interestingly, the USD-denominated stablecoin market will see a significant amount of competition from other fiat-backed digital assets, and Binance will definitely have something to say about the same. Earlier in the month, the Changpeng Zhao led exchange announced a Great British Pound [GBP] backed native-stablecoin in the works, which will be launched later in the year.

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Graduate of Finance and Economics, interested in the intersection of the world of decentralized currency and global governance.