Digital ambitions of Circle aiming to serve as a primary platform for the US dollar (and numerous other currencies as well)
The digital asset sector is at a pivotal moment, with its future development heavily influenced by the adoption of digital currencies by mainstream businesses. This shift could be the key determinant in shaping the sector's trajectory.
Yesterday, the White House unveiled its position on digital currencies, urging for swift research into a US Central Bank Digital Currency (CBDC). The Federal Reserve and the U.S. Treasury Department are currently working on developing a CBDC, with the intention to enhance the efficiency and security of the payment system, promote financial inclusion, and maintain the U.S. dollar's international competitiveness.
However, the digital asset sector's progress is not limited to consumer investing in cryptocurrencies. Jeremy Allaire, CEO of Circle, sees considerable potential in ecommerce due to the launch of more recent blockchains better suited to high-volume, low-value payments. He views USDC, Circle's digital currency, as a protocol for representing fiat currency online.
Circle's digital currency USDC has seen significant growth in circulation over the past few years and is expected to grow further this year. The company recently launched Circle Account, a digital currency equivalent of a business bank account, to make it easier for businesses to hold and use crypto. Initially, Circle Account is focused on crypto-enabled businesses, but aims to widen use to companies beyond the crypto space.
Currently, USDC is mostly used by companies operating in the crypto space to avoid regular conversion to and from fiat currencies. Circle aims to be the default digital protocol for the US dollar and other currencies such as the Euro. The revised valuation of Circle in its pending SPAC merger has grown from $4.5bn in July 2021 to $9bn today, reflecting the growing interest in the digital asset sector.
The balance between consumer demand and government regulations will play a significant role in the use of digital currencies by mainstream businesses. Consumer demand for faster, more secure, and inclusive payment systems is growing, and governments are recognising the potential benefits of CBDCs.
However, the choices made by mainstream businesses could determine much of the future of the digital asset sector. Circle is currently further ahead than many government-backed CBDCs, but this could change as more businesses adopt digital currencies and push for innovation.
Mainstream businesses' adoption of digital currencies could be influenced by consumer demand and government regulations. As the digital asset sector continues to evolve, it is clear that the choices made by businesses will play a crucial role in determining its future.
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