Ki Young Ju, the founder and CEO of CryptoQuant, has raised a cautionary flag regarding a possible new development in the crypto world—the rise of so-called “dark stablecoins.”

Ki Young Ju, the founder and CEO of CryptoQuant, has raised a cautionary flag regarding a possible new development in the crypto world—the rise of so-called “dark stablecoins.”

Ki Young Ju, the founder and CEO of CryptoQuant, has raised a cautionary flag regarding a possible new development in the crypto world—the rise of so-called “dark stablecoins.” In a recent tweet, he suggested that the development of these stablecoins could happen in the near future because of increased demand for currencies that resist financial censorship.

I think "Dark Stablecoins" will be a thing in the next bull market.

They'll emerge in 2 ways:

1. Algorithmic stablecoins that are not controlled by any gov.

2. From countries that don't impose strict financial regulations.

People will seek them as a means to avoid overreach & maintain privacy.

— Ki Young Ju 크립토퀀트 (@CryptoQuant_) March 28, 2023

Ju Predicts Rise of Algorithmic and Unregulated Stablecoins

According to Ju, such currencies could develop in two ways: first, through algorithmic stablecoins that work without government control. Additionally, they could emerge from countries that do not enforce strict financial regulations.

This development signals a wider pattern in the ways that governments and institutions interact with digital assets. Even though Bitcoin was created by the cypherpunk community as a fully decentralized and censorship-resistant network, stablecoins have always operated with a distinct model. These coins act as a bridge between digital currencies and the real economy, so they depend on central oversight to maintain their peg to existing monetary systems, achieved primarily through the use of reserve bank accounts.

The firms Tether and Circle are instrumental in the issuance of stablecoins, and these have grown in vast popularity because governments have largely overstablecoins them, with the exception of cases related to money laundering or fraud.

Of course, regulatory trends are changing rapidly. Increasingly, governments are approaching stablecoins with the same regulatory view as traditional financial tools. New regulations may restrict how people use stablecoins. For example, smart contracts could collect taxes on transactions. Users may also need to provide paperwork to manage their digital wallets. As a result, the popularity of traditional stablecoins among those seeking anonymity or greater independence from state monitoring might decline, driving usage of more unregulated networks.

Ju Warns USDT Could Become ‘Dark Stablecoin’ Amid Regulatory Push

Ju suggests that one possible outcome could revolve around USDT, Tether’s stablecoin. If Tether does not obey future U.S. government regulations, particularly during a stricter administration like a second Trump term, USDT’s high status as an icon of crypto financial freedom may change. In such a case, USDT itself might transition into being classified as a dark stablecoin due to its noncompliance with regulatory standards.

The concept of dark stablecoins is picking momentum as the crypto community wrestles with the problem of how to keep decentralization as the internet economy becomes more surveilled. Although there’s no fully decentralized stable coin that follows the price of regulated coins such as USDC, a possibility remains. Such a coin could use decentralized oracles like the Chainlink to follow pricing information, while sidestepping the powers of centralization.

Finally, a warning by Ki Young Ju indicates an emerging contradiction in the digital finance space. With states advancing to claim control over crypto assets, we may see a new generation of stablecoins launch to satisfy a greater need for financial privacy and censorship resistance. Whether these dark stablecoins will thrive or face swift crackdowns remains to be seen. But one thing is clear that the battle between decentralization and regulation in the crypto space is far from over.