Governments Worldwide Are Clamping Down on Stablecoins

That might push some users to turn to so-called “dark” or private stablecoins. They offer uncensorable transfers, but they come with high risks

Governments across the globe are clamping down on stablecoins. That might push some users to turn to so-called “dark” or private stablecoins. They offer uncensorable transfers but come with high risks and uncertain practical application.

Tighter Rules Might Spook Users Away

Stablecoins from a country could soon have the same regulations as banks, says CryptoQuant CEO Ki Young Ju. Transfers could even automatically initiate tax collection via smart contracts.

Wallets may even be frozen or need additional paperwork. That’s prompting some traders to seek alternatives. They seek tokens that can’t be traced or halted by governments.

Dark stablecoins are likely to emerge in the future.#Bitcoin was created by the cypherpunk community to be censorship-resistant and belongs to no one, making it impossible to control.

Stablecoins, however, act as a bridge between the internet and the real world, so they need to be ruled by someone. In the future, each stablecoin from a country may have the same regulations as banks.

— Ki Young Ju (@ki_young_ju) May 11, 2025

Algorithmic stablecoins face risks. One concept is an algorithmic stablecoin that maintains its peg through code instead of holding dollars or gold. It might track the price of a regulated coin such as USDC via oracles from Chainlink.

However, history shows these designs can fail. In 2022, the UST peg collapsed in a few hours. A market shock or an oracle failure might leave holders with tokens trading at a few cents. It’s difficult to regain trust once it’s lost.

Privacy Coins Already In Circulation

Privacy tech isn’t new to cryptocurrency. Cryptocurrencies like Zcash and Monero allow users to conceal transaction values and sender addresses. They’ve existed for years but are often subject to additional verification on exchanges.

Newer initiatives like Zephyr Protocol, a fork of Monero, will perform stablecoin transactions on the blockchain in a manner invisible to the naked eye. PARScoin also aims to conceal identities and associations with previous transfers. Their success will hinge on discovering secure methods to exchange tokens for normal currency.

Stablecoin Market Continues To Expand

According to Citigroup reports, the market capitalization of US dollar-denominated stablecoins exceeded $230 billion in April, an over 50% increase from last year.

Tether and USDC account for about 90% of that amount. Total stablecoin volumes reached nearly $28 trillion in 2024, almost 8% more than Visa and Mastercard combined.

Privacy Vs. Compliance

Regulated stablecoins increasingly provide proof-of-reserves dashboards and transparent licensing under regimes such as the EU’s Markets in Crypto-Assets (MiCA) framework. Those are preferred by most businesses and institutions. They require a token they can insure, deposit, and audit.

Dark stablecoins might carve out a niche for cross-border transactions where censorship is the primary concern. But broad adoption will be beyond reach without transparent means of legal compliance.

Ultimately, the stablecoin world stands at a crossroads. There will be users who pursue privacy no matter what. And there will be those who opt for coins that play by the rules.

If algorithmic concepts can remain firm, or if privacy tokens will secure a foothold in the mainstream, that remains to be seen. But the tug-of-war between control and uncontrollable money has just begun.