Crypto-currency coin Ethereum, like many others, has had its ups and downs. Photo: AFP
Like bitcoin, Ethereum has increased significantly in value since its introduction in 2015. Photo: AFP

The use of the Ethereum network to transfer value has soared to record levels.

Wednesday tweet from Ryan Watkins, research analyst at Messari, revealed data showing that the total value transferred on the Ethereum network, including ether (ETH) and ERC-20 stablecoins, now matches that of the bitcoin network, Coindesk reported

The numbers show that “Ethereum is becoming the dominant value transfer layer in crypto,” he said.

Credit: Messari

Value transfer refers to the US dollar value of the total units on a blockchain that are transferred on a given day. With bitcoin, the metric refers to the USD value of all the bitcoin (BTC) sent on a given day.

Value transfer on Ethereum differs slightly. As well as its own ether (ETH) cryptocurrency, Ethereum supports assets from third parties that can be sent and received over its network. For the above chart, value transfer on Ethereum refers to the USD value of both ETH and the Ethereum-based stablecoins that are transferred on on a given day.

Another chart from Messari show just how much the increase in the amount of value moved via USDT has boosted Ethereum’s numbers over the last few months.

Data dispute

Citing concerns about the validity of Watkins’ findings, independent developer Udi Wertheimer expressed his thoughts regarding the exclusion of Omni data, a software layer on the bitcoin network that includes the issuance of the world’s most used stablecoin, tether (USDT). The Ethereum chart had included data for USDT issued as an ERC-20 token.

“USDT on Omni is bigger than all the non-USDT Ethereum-based stablecoins. If you include USDC and the smaller ones, you should also include Omni-USDT,” Wertheimer said.

But Watkins was quick to answer back, arguing the conclusion remained the same.

“USDT transferred over Omni has dropped substantially as USDT has migrated over to Ethereum,” Watkins told CoinDesk.

“Furthermore, the amount of value transferred on Ethereum is slightly underestimated because it only includes the top stablecoins that CoinMetrics provides data for, and not all Ethereum based tokens,” he said.

New record

In his tweet thread, Watkins also noted that stablecoins have just had their best quarter to date. Issuance in the first quarter of this year, he said, had “ballooned over $8 billion,” adding almost as much to the category’s market capitalization in Q1 as for all of 2019.

“Over the past two years, many stablecoin issuers have created stablecoins on Ethereum because of its flexible token standards that allow for the easy issuance and interoperability,” according to Watkins.

“These stablecoins have grown so great in amount that they’re now being widely used as money on the Ethereum blockchain. Instead of sending and receiving value in ETH, which is volatile, users can send value in stablecoins which are price-stable with the US Dollar,” the researcher said. 

The bad news

The stablecoins responsible for driving Ethereum’s growth may be under threat. Leaders from the world’s top industrialized nations are on the offensive regarding the emergence of digital currencies that could rapidly gain a huge user base and alter the financial landscape, like Facebook’s proposed Libra coin, The Daily Hodl reported.

The G20’s regulatory watchdog, the Financial Stability Board (FSB), has released a 62-page document entitled “Addressing the regulatory, supervisory and oversight challenges raised by ‘global stablecoin’ arrangements.” It sets out a list of recommendations aimed at controlling the use of stablecoins. Its primary objective is to map out a global strategy for regulating the asset class.

Stablecoins are a new class of cryptocurrency pegged to assets such as fiat money and gold to minimize price volatility. They leverage blockchain technology and digitization to make efficient domestic and cross-border payments. As a store of value, they can also facilitate cryptocurrency trades, maintaining a fixed price as investors move in and out of various coins.

FSB’s list of 10 recommendations, released on Tuesday, reveal that central banks are concerned about Facebook’s plans to roll out Libra, a potentially powerful stablecoin with the ability to rival traditional currencies in cross-border transactions, compromising the status quo.

While financial rules that regulate traditional payments and customer checks do apply to stablecoins, addressing certain risks associated with crypto assets, the FSB has identified specific issues with cross-border stablecoins. The recommended solution is to implement a flexible, cross-border cooperation that can control these crypto assets.

To address vulnerabilities posed by stablecoins and to ensure that they do not undermine financial stability, the FSB recommends that regulators should have the power to limit or prohibit activities tied to this particular class of crypto assets.

“Authorities within a jurisdiction, either independently or collectively, should have and utilise the appropriate powers and capabilities to regulate, supervise, oversee and if necessary prohibit effectively the activities being conducted and services being offered to users in or from their jurisdiction and the attendant risks that these services and activities may pose.

“This may include, for example, services and activities related to the governance/control of the stablecoin arrangement, operating the infrastructure of the stablecoin arrangement, issuing/redeeming stablecoins, managing stablecoin reserve assets, providing custody/trust for stablecoin reserve assets, trading/exchanging stablecoins, or storing the keys providing access to stablecoins.”

The regulatory body also says that stablecoin operators need to manage risks, be operationally resilient, as well as take measures against cyber attacks and systems to curb terrorist financing and money laundering.

“Relevant authorities should, where necessary, clarify regulatory powers and address potential gaps in their domestic frameworks to adequately address risks posed by GSCs [global stablecoins].”

The recommendations, which reference the most widely traded cryptocurrency, the stablecoin Tether (USDT), as well as other high-volume stable crypto assets such as USDC, TUSD, PAX and DAI, will be officially presented to the G20 leaders.

You can check out the full list of recommendations here.