A 38% increase in stablecoin loans has been reported by Genesis Capital, one of the largest institutional lenders of cryptocurrencies, in the third quarter of 2019.
Genesis Capital’s team reported that the growth in their lending business continues to grow as the record of $746M that had been set in the second quarter of this year was broken in the third quarter with a staggering $870M in new originations.
Loans are usually acquired through stablecoins or DeFi (decentralized finance) by investors and businessmen in the crypto industry, and typically when the market shows positive growth trends. The value of stablecoins is equivalent to that of the financial asset to which it is pegged, and an increasing demand of stablecoins following a rise in the price of Bitcoin(BTC)trade against the U.S. dollar shows a positive business sentiment in the crypto industry.
Since the beginning of this year, a two-fold increase has been recorded in the price of Bitcoin as it has jumped from around $3,700 to over $9,000.
Regulated Stablecoins Improve Market Conditions for Loans
According to Michael Moro, the CEO of Genesis Capital, there are now better market conditions for companies to obtain reliable financial services due to stablecoins such as Paxos (PAX) and Circle’s USDC (USDC), which are self-regulated.
Moro agreed that there is an overall increase in the market sentiments and added that with the rise of stablecoins, new use cases for the loan market have been opened. Initially, shorting/hedging was the use case for crypto lending but now regulated stablecoins can be used as the digital dollar, which obviously have a lot more use than any other cryptocurrency.
According to Moro, the lack of trusted banking services and bank support hurts companies in the crypto world and has caused an inability of the crypto industry to see its full potential. But despite the lack of support from the banks, the crypto sector has still managed to grow for years. A lot of companies managed to operate by using the stablecoins as an alternative to banking services.
Similarly, government bodies and regulatory authorities of major crypto markets like South Korea, Japan, and the U.S. have been trying to provide clarity around the regulatory frameworks related to the crypto, but still a large part of the industry has to operate without proper banking services.
Moro also shared what it would be like if the banks start to support the crypto industry. He said that in that case, the industry would flourish even more but there is a likelihood that it would hamper the growth of stablecoins. However, stablecoins would still appeal to overseas companies that have to struggle to obtain efficient banking services from U.S.-based banks.
