In a report published on Monday (March 6), the digital assets market data provider Kaiko said that Silvergate Capital’s decision to shut down its instant settlement service SEN, which was very popular among large investors, will promote the role of stablecoins in crypto trading.
Silvergate is an important banking partner for many digital asset companies, meanwhile, its SEN platform has been a widely used vehicle for investors to deposit funds to crypto exchanges. As the bank delayed filing its annual report last week and warned of possible legal requirements; many companies in the crypto space, including Coinbase, Circle, Paxos, Binance.US, Galaxy Digital, and Gemeni have all had to suspend transfers and operations with Silvergate.
“With the death of SEN, stablecoins will likely become even more ubiquitous among traders”, the Kaiko report said. Instead of sending dollars to crypto exchanges via banks, Kaiko predicted that traders will transfer funds to stablecoin issuers to receive stablecoins, then depositing stablecoins into exchanges. However, the problem is that stablecoin issuers still need access to a crypto bank, so the risks are now more concentrated.
The fall of US dollars in trading
Stablecoins like Tether’s USDT and Circle’s USDC have become the cornerstones of the crypto market, replacing government-issued fiat currencies like US dollars for buying and selling cryptocurrencies. Kaiko said the number of fiat trading pairs has decreased as stablecoins grow.
The role of US dollars in crypto trading is also showing signs of diminishing. Last year, the number of new dollar trading pairs on exchanges fell from 400 in 2021 to 326.
According to Kaiko, since the crash of FTX, the market share of USD has fallen steadily relative to USDT, USDC and euro trading pairs. For instance, USDT’s dominance in terms of Bitcoin trading volume recently hit an all-time high of 93% versus US dollars – a spectacular rise from 3% in 2017.