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AI and account abstraction to shape next-gen stablecoins

AI and account abstraction to shape next-gen stablecoins

GrafaGrafa2024/12/20 09:10
By:Mahathir Bayena

Reeve Collins, the founder of blockchain neo-bank WeFi, predicts that artificial intelligence (AI) and account abstraction will transform the stablecoin market.

He suggests that the number of viable stablecoins will increase as these technologies simplify decentralised finance (DeFi) operations.

Collins explained that AI agents and account abstraction will allow users to bypass the complexity of managing DeFi tasks and executing trading strategies.

This simplification will make it easier for users to access yield-bearing assets, such as synthetic dollars and algorithmic stablecoins.

Collins believes that once the technical barriers are reduced, these simplified financial instruments will compete for investor attention.

“When the application layer gets a little more mature and when AI is integrated, all of the complexity in this space will be gone, then the only thing that will drive which token to use is which one makes you the most money, which one is the easiest to use,” he said.

Currently, most crypto users rely on traditional, overcollateralised stablecoins backed by fiat reserves, which offer no yield and maintain the underlying fiat characteristics.

This is in contrast to emerging yield-bearing instruments that Collins sees as part of the next generation of stablecoins.

The stablecoin sector’s market capitalisation is around $204 billion, but the industry remains highly centralised.

Regulatory scrutiny over stablecoins continues, with concerns about their potential risks to the financial system.

A report from the United States Financial Services Oversight Council (FSOC) highlights risks associated with overcollateralised stablecoins, including vulnerabilities to withdrawal runs.

Meanwhile, Coinbase has recently delisted Tether’s USDT (CRYPTO:USDT) stablecoin in the European Union to comply with the EU’s Markets in Crypto-Assets (MiCA) regulations.

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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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