Ethereum-Based Curve USD Stablecoin is Driving Curve Token Prices Higher

There has been a surge in tokens that are related to decentralized stablecoin protocols over the past 24 hours due to problems with Paxos' BUSD offering.

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The token of stablecoin swapping service Curve (CRV) has gained 11% in the past 24 hours on the back of a growing demand for decentralized stablecoins across the market.

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Despite the fact that Curve does not offer native stablecoins just yet, its upcoming Curve USD (crvUSD) token is much anticipated in the cryptocurrency world. CoinDesk first reported in June that Curve planned to deploy a dollar-pegged asset in the near future.

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“A proposal on the table appears to be requiring a stablecoin pool to supply pricing data to external protocols in order for crvUSD to function autonomously,” as Curve teased on Monday. The ongoing proposal is designed to assist stablecoin pools in providing pricing data to external protocols.

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The emergence of such a development may have served as a catalyst for traders as the price of CRV rose, and there was an increase in trading volume of over $770 million on crypto exchanges as a result.

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Curve offers users financial services such as stablecoin borrowing, trading, and lending through smart contracts rather than middlemen. In one of the many pools on Curve, depositors earn an annual yield of up to 4% by investing in one of the many pools offered by the platform.

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In the crypto community, it has been hailed as one of the most popular and influential protocols and has locked up $4.6 billion in tokens.

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CRV traded above $1 on Tuesday, returning to levels that were seen earlier in the month and bucking the overall market decline as bitcoin (BTC) fell 1% in value. Cryptocurrencies have recently become more volatile because of tokens related to decentralized stablecoins, which are now driving market volatility.

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In a report published by Trade Algo on Sunday, the U.S. Securities and Exchange Commission (SEC) claimed BUSD was an unregistered security. It comes after CoinDesk reported previously that Paxos was under investigation by the New York Department of Financial Services, though it is unclear what the scope of the investigation is of NYDFS.

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In light of this, traders are likely to look for decentralized stablecoins, which are less likely to be affected by legal consequences in the future, and as a result are likely to outperform centralized stablecoins, such as BUSD.

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To back up the peg between a stablecoin and a fiat currency, usually U.S. dollars, decentralized stablecoins rely on a basket of cryptocurrencies. In terms of how stablecoins are maintained, they can either be algorithmic, in which another coin is issued and constantly minted or burned to help maintain the stablecoin's peg, or overcollateralized, in which the basket of assets is greater than the net circulation of the stablecoin.

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“I think the crvUSD could prove to be a very interesting development since we've never seen a stablecoin issued by a decentralized exchange as of yet,” Daniel Zlotin, senior DeFi developer at Orbs, wrote in a Telegram message to CoinDesk explaining the utility of crvUSD.

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“It might be interesting to connect a stablecoin with a viable [decentralized finance] platform to explore new models (for example, using LP tokens as backing),” Zlotin said, but noted that implementing such a concept would present some challenges.

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