While investing in cryptocurrency might be a smart way to balance out your investment portfolio, the ways in which we can use digital assets to buy actual goods are limited. That’s because it’s not always easy to exchange cryptocurrencies like Bitcoin (BTC) into fiat money that you can use to make purchases. Plus, most places don’t accept digital currency for payment — yet.
Additionally, cryptocurrency volatility makes it difficult to count on the value to pay for everyday items. These digital asset facts might keep people away from the crypto market altogether.
But there is a way to easily exchange your cryptocurrency for fiat that most people don’t know about. It promises to open doors for cryptocurrency firms and individuals as well. That way is through stablecoins.
How a Stablecoin Works
A stablecoin is a new type of cryptocurrency that, as the name suggests, offers price stability and is backed by a reserve asset, like a fiat currency or a commodity’s price, such as gold. This form of digital money offers the security and privacy like that of a cryptocurrency without the volatility. A stablecoin aims to serve as the bridge between cryptocurrency and fiat currency. A person who holds cryptocurrency can exchange it for stablecoins, and then exchange them into fiat money such as the U.S. dollars quicker and easier than exchanging the cryptocurrency directly to dollars.
Mastercard (NYSE: MA) recognized the limitations of cryptocurrency firms using its services and the opportunities for businesses to accept payment in the form of cryptocurrency, and thus launched a partnership with Circle in July 2021 to start accepting Circle’s stablecoin, USDC. This stablecoin is said to redeem 1-for-1 with the U.S. dollar, so consumers and merchants with digital wallets can transact easily. This milestone helps pave the way and open new doors for other stablecoins and cryptocurrencies to enter mainstream markets.
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