For years, the **stablecoin market** was something that most overlooked.  It was utilized, existed, and people wrote about it once in a while.  However, as cryptocurrency evolves, stablecoins are becoming more of a focus.  This is bringing some attention that the purists in the industry might not want.

Of course, at the head of the list is the regulators.  They are salivating over the opportunity to get their claws into this market.  Politicians are also pulling out the stick, beating the drum every opportunity.

Then we have overall government control.  Since the aforementioned figures like to promote the idea that cryptocurrency is used for illegal activities, the logical conclusion is this must be **under the control of the governments**.

The attention is increasing.  For this reason, the industry is going to have to take action to counter the situation.

<center>![image.png](https://images.hive.blog/DQmYE84mQLdpRrYUoWMnaKdo5q91xnMtG5V5cctudnii1TN/image.png)
[Source](https://miro.medium.com/max/1024/1*KN6-Jj1AKI8H8xUnwcTzPg.jpeg)</center>

### Tether Freezes Account With $1 Million

**Tether** is the leading stablecoin.  There are over 78 billion of them on the market.  This is a small amount when we consider how much USD is issued.   Nevertheless, the fact that each Tether is supposed to be backed by 1 USD has repeatedly been called into question.

We also see how this does not operate like other cryptocurrencies.  With the likes of Bitcoin and Ethereum, what is in one's wallet is under their control.  As long as the keys are with that individual, he or she can do as seen fit with the tokens.  Of course, this puts the onus upon that person to make sure he or she is using the right addresses when moving things around.  There is no way to reverse transactions (short of a hard fork).  

It is not the case with Tether.

On their platform, there is a mechanism which allows them to **lock certain tokens**.  This is a feature that fulfills the situation just described.  It can be utilized to correct transactions sent to the wrong wallet.

This is not all that can happen.

>A Tether spokesperson told The Block that Tether regularly works with regulators for freezing addresses.

Tether recently froze an account with $1 million in Tether in it.  This means that the account cannot move the tokens.  

>...said Tether regularly works with regulators and law enforcement agencies worldwide, including on any cases related to hacks and scams, for freezing addresses.

<center>[Source](https://www.theblockcrypto.com/post/129133/tether-freezes-over-1-million-usdt-single-address)</center>

Naturally, this sounds wonderful on the surface.  If someone steals money via a hack, most would say they prefer that person not be able to use the funds.  **Freezing the wallet** makes a lot of sense.

The problem arises in the fact that if they can freeze these funds, they can freeze yours.  Tether already admitted they work with law enforcement and governments.  This means it will be open to other political pressures.  One only needs to look at what the cannabis industry went through regarding payment systems.

In short, we have another opening for **tyranny to enter**.  This is not what cryptocurrency is designed for.

### Regulation Bonanza 

Stablecoins are getting the attention of regulators all over the world.  Could 2022 be the year we see a widescale amount of regulation emerge as governments seek to control what is taking place?

We already know the FUD is being piled on.  In addition to the criminal activity talking point, we see the **"stablecoins will de-stabilize"** the global economy.  The thought here is that stablecoins not backed by what is claimed could produce a level of economic uncertainty which magnifies risk.

Actually, there is some validity to this point.  Stablecoins as an instrument pose no threat to the stability of the economy.  Yet, if there is fraud, it could become an issue if it becomes big enough.  

Of course, we have to keep things in context.  Tether, which many question, claims to have $78 billion backing their tokens.  This is a lot of money but could it take down the global economy if untrue?  Bernie Madoff ran a Ponzi scheme to the tune of $60 billion.  Was that a threat to the stability of either the global economy or financial system?  Not even close.

Nevertheless, this is going to cause a bonanza among **regulators**.  They awoke to the threat when Facebook announced the DIEM a number of years ago.  Even though that token is still not to market, the regulators were put on high alert.  The slumber they were enjoying ended.

In the United States, one of the biggest changes is that stablecoin issuers could need banking licenses.  This will close the gap between the financial technology companies and traditional banks.  It also could force a company like Circle to get FDIC insurance on the holdings.  Of course, this would give them the same rights as banks, allowing them to secure deposits which could be used to purchase longer term bonds or engage in loan origination.

As we can see, this is a hijacking of the entire **concept of cryptocurrency**.

### Algorithm Based Stablecoins

We spent a great deal of time discussing different aspects of the **Hive Backed Dollar (HBD)**.  This is an alternative approach to the traditional stablecoin idea.  Instead of backing it with USD, it is using algorithms to provide the value.  By tying it to another asset (HIVE), we see how the full value is derived.

There is also a level of **transparency** that is not available with the likes of USDT or USDC.  At present, we only have their word as to what is backing the tokens.

The recent popularity of UST (Terra) shows there is a large market for these types of stablecoins.  It, too, is based upon an algorithm. 

Another factor that is becoming increasingly important is the idea of **decentralization**.  By this we mean the fact there is no individual or company behind the issuance of the token.  HBD is generated by the coding in the blockchain.  This means that regulators and other associated entities cannot take any legal action.  

The final factor is that these tokens have nothing to do with USD.  Unlike the others, the USD is only a unit of measure.  Hence, nowhere in the process is the USD involved.  The currency is not held by anyone nor does it engage with the stablecoins.  

It is going to be upsetting to those in power when they realize there is truly nothing they can do about these tokens if they are not issued by a company.  If they do reside on a blockchain, there is little action to take.

We are rapidly moving towards a world where one's **money cannot be locked or a wallet frozen**.  Unlike Tether, if one has $1 million worth of HBD sitting in an account, it can be moved at will.  Again, this might be upsetting for those who get the money through nefarious actions.  However, to protect people from tyranny, it is a small price to pay.

Governments are known for taking people's money.  That is the appeal of CBDCs.  Politicians and bureaucrats think it is their right to determine what people can do with their money.  Many in cryptocurrency, naturally, disagree with this.

Once again, whatever regulation they want to present, we must simply develop around it.  Here is an example of how something like the **Hive Backed Dollar** is becoming ever more important.

As stablecoins come into focus, we need to concentrate on those that work around what the governments are trying to do.  This is where the next battle is going to take place.

Fortunately, the outcome is already known.  There is nothing they can do about an **algorithmic driven stablecoin** that is resident at the blockchain level.

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