The problem of counterfeit money has always remained relevant in the fiat world. Technological progress allows you to constantly increase the quality of printing, so everything depends on a vicious circle – the responsible authorities create new identification marks, and attackers learn to fake them too.
According to statistics, 92% of all counterfeit money is in US dollars, since they are in demand all over the world, and they are also easier to “copy”. A report from the United States Department of Treasury states that there are between 70 million and 200 million counterfeit dollars in circulation in the local market. They manage to go through several hands before the fake is discovered and seized.
In 2023, the total amount of US dollars in circulation broke the $2.3 trillion mark. Over the past four years, this figure has increased by 35.29%. Of these, $600 billion is in circulation in the form of banknotes. The volume of counterfeit money on the world market in 2022 is estimated at $800 million, and this is the highest figure in history – 0.13% of all US paper dollars are counterfeit.
Source: Ycharts
The department has developed a whole system of measures aimed at combating counterfeiters, but the influx of counterfeit dollars is still increasing.
Gaps in legislation and expensive equipment
It will sound strange, but American legislation unties the hands of the “money artists”, which, on the other hand, is fighting them.
The last redesign of the dollar bill took place in 2013 – banknotes acquired a blue color and a whole list of security elements. Prior to this, “identification marks” on dollars were introduced in 1996. And even earlier, a fake was distinguished from the original only by the quality of the produced banknote. In most countries, dollar bills issued before 1996 will not be accepted. But not in the USA. State law states that “all dollars remain legal tender, regardless of the year they were issued.” This item opens up a lot of opportunities for attackers. Why buy expensive equipment to counterfeit new dollars when you can do it with banknotes from 1990, 1995 or 2000? Frank Buresse, one of the most famous counterfeiters, claimed that it was easier to counterfeit dollars than the currencies of other countries, since the United States does not use polymers in production. In the end, Frank printed over 200 million counterfeit dollars, made a deal with the government after his arrest, and spent only a month and a half behind bars.
Given the capabilities of modern equipment, counterfeiting old-style banknotes has become easy. Special equipment helps to distinguish a fake from a real dollar. It is relatively inexpensive – prices for high-quality branded equipment range from $100 to $1,000. The owner of a small store in the United States can afford such expenses, but taxi drivers, street vendors or delivery men, for example, will not carry equipment with them.
And there are still a number of poor countries where the US dollar is the official currency. This includes East Timor, Zimbabwe, Panama, Ecuador, etc. There certainly few people care about the authenticity of the dollar. By the way, most counterfeit banknotes come to the US from Latin America.
It seems that the problem will remain without a solution, and the attackers will continue to cash in on the manufacture of fakes. But we can end this once and for all. Stablecoins are able to protect the market from counterfeit money.
Stablecoin – a cryptocurrency with an admixture of reliability
The emergence of “stable coins” in 2015 allowed the cryptocurrency market to reach a fundamentally new level, attracting millions of new users. Investors and traders got the opportunity to use decentralized digital coins that are not subject to volatility. The value of a stablecoin is backed by real assets. Stablecoins are pegged to fiat, precious metals, commodities, stocks, and indices, but the most sought-after stablecoins are backed by the US dollar, so their value is always $1.
All data on completed transactions is stored in the blockchain – information cannot be replaced or faked, and new tokens are issued only by official issuers. The risk of “fake stablecoins” appearing on the market is eliminated thanks to the same blockchain technology.
Stable cryptocurrencies are convenient, reliable and safe, so the demand for them is growing exponentially.
Growing demand for stablecoins
In the top 10 cryptocurrencies by capitalization, stablecoins take three places at once – Tether (USDT) with a capitalization of $71.59 billion is in third, USDC is in fifth with a capitalization of $43.62 billion, and BUSD closes the top ten – market cap is $8, 41 billion.
If you look at daily trading volumes, the situation is even better for stablecoins – the first (USDT), fourth (BUSD) and fifth (USDC) rankings.
Source: Coinmarketcap
Let’s see how the capitalization of the “big three” stablecoins has changed since 2019 (we previously relied on this time period to track the increase in fiat dollars in the market). In 2019, the USDT capitalization is only $2 billion. USDC has a little over $350 million, and BUSD tokens have just appeared on the market, the capitalization barely exceeded the $10 million mark. The total volume is 2.36 billion dollars. Four years later, that figure has already risen to $123.62 billion.
The volume of fiat dollars in circulation has increased by 35% in four years, while the volume of stablecoins has increased by 5238%. To date, stablecoins are ready to cover 5.36% of the total dollar turnover.
How can stablecoins replace fiat?
Why is the demand for paper dollars still high? Payments in banknotes are fast, without commissions and without involving banking applications. The situation is similar with stablecoins. Transactions are carried out with a minimum commission (depending on the blockchain), and to transfer funds, you only need to have a crypto wallet (quite anonymous, which opens on a smartphone in a couple of minutes). The whole process is as simple as possible, both for the sender and the recipient.
BUSD tokens are issued on the BNB Smart Chain, BNB Beacon Chain, Avalanche, Tron, Polygon and Optimism blockchains. Tether coins are issued on the Ethereum, Tron, EOS, Algorand, Solana, OMG Network blockchains. USDC stablecoins were initially issued only on the Ethereum network, and then Algorand, Solana, Stellar, Tron, Hedera, Flow, and Avalanche blockchains were added. Commissions vary significantly depending on the specific network. Here are some examples:
- The average commission in the Ethereum network is $6.09;
- The average commission in the Polygon network is $0.000068;
- The average commission in the Avalanche network is $0.16;
- The average commission in the Algorand network is $0.00028;
- The average fee on the BNB Smart Chain network is $0.44.
On some blockchains, transaction fees are as low as 1 cent, making transactions essentially free for the seller and buyer.
Legislative restrictions
The US government perceives stablecoins as a threat to the fiat dollar, so Washington is coming up with new reasons to contain the growth in popularity of “stable digital coins”.
Tether Limited, the issuer of USDT and several other stablecoins, is facing several litigations at once. In total, more than $60 million in fines have been paid, and in September 2022, a New York court ordered the issuer of stable tokens to provide financial statements confirming that USDT coins were backed by real dollars.
In February 2023, problems began with Paxos Trust Company, the issuer of BUSD, the third most popular stablecoin. The SEC (Securities and Exchange Commission) is threatening to sue Binance USD as a security. The capitalization of the stablecoin fell almost three times.
Source: Coinmarketcap
The efforts of the US government to contain the rise in popularity of stablecoins are like a wooden fence built in the path of an avalanche. Temporary difficulties are taking place, but the demand for a “stable cryptocurrency” is only growing.
Stablecoins promise to be exactly the driver needed for the massive and widespread acceptance of cryptocurrency as legal tender.
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