Tight Regulations Could Give Rise To Dark Stablecoins, Says CryptoQuant CEO

• The CEO of CryptoQuant predicts that stringent regulations in the digital assets sector could trigger a demand for dark stablecoins.

Countries are now pushing or have already successfully passed stablecoin regulations. There’s the potential passage of the GENIUS Act in the US, and there’s the MiCA (Markets in Crypto-Assets) Regulation in the EU. For many, regulation is a welcome relief for both issuers and users because it provides a clear legal framework in which they can operate. It also provides transparency and security for the parties with the checks and balances embodied in the rules.

However, Ki Young Ju, the founder and CEO of CryptoQuant, warned that too much restrictions could pave the way for demand in “dark stablecoins.” He defined these assets as completely decentralized and “censorship-resistant.”

Ki believes that the stablecoins landscape may be changing soon. He explained that governments will inevitably subject stablecoins to the same rules that apply to traditional banks. They could force issuers to embed features for automatically triggering tax collections through smart contracts, demand a freeze of assets for prosecuted individuals and businesses, and impose stringent reporting requirements.

Types of Dark Stablecoins

According to Ki, dark stablecoins could be created in two ways. They could be introduced as algorithmic stablecoins that are totally free of government control, and they could be issued by countries that don’t censor financial transactions.

Developers could anchor the dark stablecoin to the price of regulated coins like Circle’s USDC through data oracles like Chainlink. He noted, though, that he is unaware if such a project already exists.

In addition, Ki said the USDT has the makings of a censorship-resistant stablecoin. Tether could implement the other version if it chooses not to comply with US regulations.

“I’m not sure if there are still long-term crypto investors out there, but I think dark stablecoin-related assets could have investment potential in the Internet capital markets,” Ki concluded his post with a reminder that his readers should still do their own research.

Community Reactions

Ki’s insights have led to mixed reactions from crypto community members. Most praised how the government now recognizes the inherent advantages of stablecoins.

On the other hand, some feared that the plausibility of the emergence of dark stablecoins in the mainstream market grows as legislators grapple with balancing regulations to ensure stakeholders’ protection and continuous innovation.

For the majority, dark stablecoins are undoubtedly the next evolution of the market that craves true decentralization.