Global inflation rises:How stablecoins are helping to protect savings
Categories: Crypto News
Global inflationrises: How stablecoins are helping to protect savings
Economiesaround the world are facing challenges due to rising inflation. High inflationdevalues national currencies, which, in turn, increase the cost of living,especially in scenarios where earnings remain unchanged. In the UnitedStates, the government has reacted aggressively to inflation.
The nationhit a 9.1% inflation rate in June, prompting the Federal Reserve to implement aseries of fiscal countermeasures designed to keep the economy from overheating.The hike in interest rates was one of them. The Fed's rising interest rateshave slowed consumer spending and business growth in the country.
Theanti-inflation outlook has also strengthened the value of the US dollar againstother currencies due to tight checks on dollar's liquidity. As 79.5% of allinternational trade is conducted using the dollar, many countries are nowpaying a premium for imports to offset the rising value of the dollar,worsening inflation in those importing countries.
Setiawanalso predicted that the remittance industry is likely to be disrupted in thenear future due to the mix of benefits offered by the stablecoin sector. “Withinterest in stablecoins fueled by a variety of factors, I can predict that itwill be a matter of time before this asset class sees the remittance industrydown by a significant margin,” she said.
On this lastpoint, remittance companies are really taking notice and, in recent months,have taken steps to claim share in the stablecoins market. For example,MoneyGram recently partnered with Stellar to provide stablecoin remittanceservices on its network.
Astablecoin is a digital currency whose value is often pegged to an asset or regulated by analgorithm to maintain a stable value. Collateralized stablecoins are themost popular and are backed by a stock of their underlying assets. In mostcases, their value tracks that of popular national currencies such as the USdollar, British pound or euro.
This rangeof stable coins is widely used by crypto traders looking to avoid turmoil inthe crypto market and by users looking to protect their money againstinflation. Other types of stablecoins include commodity-backed,crypto-backed and algorithmic stablecoins.
Whystablecoins are ideal as instruments against inflation ?
Stablecoins are ideal as instruments againstinflation for several reasons. One of them is his unchanging and limitlessnature. The decentralized nature of blockchain technology on whichstablecoins operate allows them to travel across borders that might otherwisebe closed to cross-border financial activities. Stablecoin transactionsare also faster and cost-effective than fund transfers done through commercialbank networks. This makes it convenient for those who want to send and receivemoney and protect against inflation.
In somedeveloping nations, many people lack the necessary documentation to open a bankaccount, and so they are shut out of their nation’s main financial systems.Using stablecoins allows this group of users to send and receive moneyeasily and use their monetary assets to hedge against inflation when the needarises.