The stablecoin industry has been steadily on the rise since the start of 2018. The rise can mainly be attributed to the need for stability in an incredibility volatile sector. Businesses cannot be run on cryptocurrencies such as bitcoin due to its inherently volatile quality, though it does seem relatively stable right now within the USD 6,000 – USD 7,000 band.
A Sterling-backed stablecoin
2018 has seen a number of stablecoins hit the market, too many to list or to go into in detail. Some of the bigger and more interesting types of stablecoin on the market right now include Tether, TrueUSD, Haaven, Dai, and Carbon. Last week, Bit Trade proposed the launch of an Australian stablecoin. The month prior, Gemini and Paxos were given the green light by regulatory authorities to proceed with their respective stablecoins. Each stablecoin will have distinct features. Some are transparent in how they are pegged to fiat, some offer investor protection, and others supply direct ownership of physical assets.
In the UK, a London-based startup known as London Block Exchange has announced its intentions to create LBX Peg, a stablecoin backed by the Pound Sterling. The startup has not announced its banking partner yet (a necessity for a stablecoin), but the reserves will be held by a third party bank on a 1-1 basis. It is the first of its kind to be launched in the UK. According to CEO Benjamin Dives –
“The primary use case will be settlement for OTC trades in the London market, then commonwealth exchanges where they don’t have fiat banking, and then securities tokens who want to pay dividends in a cryptopound… We would be ready for the first cryptopound to be minted in the next 10 days.”
What are stablecoins?
Stablecoins are essentially a cryptocurrency linked to a fiat currency on a one-to-one basis. In other words, the stablecoin always retains its value. The main stablecoin is Tether, which is backed by USD. However, Tether has been associated with numerous scandals. While there is a need for stability, the purpose of stablecoins is highly questionable. Cryptocurrencies are a free, secure, and transparent workaround for a clearly corrupt financial infrastructure, and have already helped millions of people on a non-speculative basis.
Stablecoins do not seem to have any real use aside from profit taking. There does not appear to be any significant difference in investing directly in fiat as compared to investing in a stablecoin. If the fiat goes down, so does the pegged stablecoin.
Cryptocurrencies are often viewed as a hedge against a loss of fiat purchasing power, so the concept of stablecoins goes against the core blockchain ethos. If fiat currency is a scam, then stablecoins are one step down the Ponzi chain. They have little practical value for everyday citizens, though they may have applicability for complex traders and those needing to avoid regulatory hurdles associated with fiat currencies. All this aside, they could assist in bringing cryptocurrencies further into mainstream society.
Digital Nomad with an interest in Zen and Blockchain technology.
Law graduate with 3 years experience as a consultant in the capital markets industry and 4 years experience freelancing on UpWork as a Creative Writer.