Dark stablecoins will emerge, here’s why

CryptoQuant CEO Ki Young Ju predicts the rise of “dark stablecoins” as government regulations on digital currencies tighten.

In a recent social media post, Ju shared why censorship-resistant stablecoins might become necessary as traditional stablecoin issuers face increased scrutiny.

According to Ju, while Bitcoin (BTC) was designed to be censorship-resistant by the cypherpunk community, stablecoins currently need centralized management to bridge digital and traditional finance.

Chinese miners use Tether and Circle stablecoins

The CryptoQuant executive highlighted that stablecoins like those issued by Tether and Circle have operated with minimal government interference — until now. As per Ju, it has served as a safe haven for various groups including Chinese miners.

“Governments, except when tackling money laundering, haven’t really interfered with stablecoins,” noted Ju. Ju predicts that government-issued stablecoins will soon face regulations similar to traditional banking. This could potentially need automatic tax collection through smart contracts and implementing wallet freezes based on government mandates.

These changes could drive users who rely on stablecoins for large international transfers to look for alternatives that resist censorship. How? Ju presents two ways:

1. Algorithmic stablecoins that aren’t controlled by governments.

2. Stablecoins issued by countries that don’t censor financial transactions.

One technical approach could include decentralized stablecoins that track regulated coins like USD Coin using oracle networks such as Chainlink (LINK). However, Ju stated that he hasn’t yet identified projects that have successfully implemented this model.

Interestingly, Ju suggested that USDT could turn into a dark stablecoin if the company opts not to comply with U.S. regulations under future administrations. The CryptoQuant CEO noted that dark assets might present investment opportunities in internet capital markets.