It’s no secret that stablecoins are meant to be stable. The question is: do they have stable business models capable of earning profits for the companies behind them?
The short answer is that, in many cases, they do. However, as the cryptocurrency industry matures one of the main selling points of stablecoins – the current absence of convenient fiat-crypto onramps – could become endangered.
“Most stablecoin projects are designed to make a profit for their founders, usually from transaction fees,” Glen Goodman, the author of The Crypto Trader, told Cryptonews.com.
There are numerous examples of stablecoin fees, although they come in different forms. For example, Circle occasionally charges a withdrawal fee for converting its USDC stablecoin into U.S. dollars, requiring users to pay USD 50 in the event of failed wire transfers.
Likewise, Tether charges a 0.1% fee for buying USDT and anything from a 0.4% to 3% fee for converting USDT back to USD. Meanwhile, the Digix Global stablecoin (DGX) – which essentially tokenizes gold – charges a 0.13% transaction fee and also a “Daily Deductible Demurrage Fee” charged annually at 0.6%.
Numerous other stablecoins don’t in fact charge a transaction fee, but there are still costs associated with usage that generate revenue for the companies which produce them. For instance, Paxos doesn’t charge any direct fees for converting or redeeming its Paxos Standard Token, but it nonetheless charges fees for using its crypto-exchange, so in the longer term users end up paying indirectly for the use of the stablecoin.
Similarly, eToro offers a range of stablecoins through its eToroX crypto exchange, and according to the managing director of eToroX, Doron Rosenblum, the primary purpose of these coins is to facilitate greater volumes of trade.