There are few segments of the cryptocurrency industry that get as much focus from policymakers as stablecoins.
While it’s still relatively early for crypto, fintech companies regard stablecoins and possibly central bank digital currencies (CBDCs) as more “elegant” than bitcoin (BTC) with respect to payments.
Earlier this year, PayPal announced it seeks to launch a regulatory compliant stablecoin, possibly pegged to the US dollar. Jose Fernandez da Ponte, Senior Vice President of Crypto and Digital Currencies at PayPal said,
“We are exploring a stablecoin; if and when we seek to move forward, we will of course, work closely with relevant regulators.”
Dan Schulman, the Chief Executive Officer of PayPal recently reiterated his positive stance on the cryptocurrency industry. In his view, the “intersection” between digital assets, CBDCs, stablecoins, and digital wallets will,
“redefine a lot of the financial world going forward.”
Provided that they are safe and stable in value, cryptoassets and the technology underpinning this innovation could bring a number of benefits including lower transaction costs and increase the speed of cross-border payments by allowing transactions to take place directly between individuals reducing the need for centralised intermediaries. If undertaken within a well-designed and proportionate regulatory regime, this technology could increase competition in the global financial system, further lowering costs to end-users.
Ever since Meta announced their intentions of launching Diem a Global Stablecoin that would be instantly available for payments to Facebook’s 2.3 billion users, central bankers and financial organisations had Stablecoins in their crosshairs.
Custodial stablecoins like e-Money.com's suite of European Stablecoins and Circle's Global US Dollar Stablecoin have a fiat-based backing that are controlled by the stablecoin issuer. For example, if a coinholder deposited £100,000 with the stablecoin issuer, they would receive an equivalent value of stablecoins in return. The ability of the stablecoin issuer to meet all redemptions at par value requires that the value of the stablecoins’ backing remains in line with the stablecoins in issue, and that their liquidity matches their possible redemptions
With payments rails in a stablecoin friendly regulatory environment it would be a lot easier to get merchants to accept stablecoin payments. Stablecoins have clearly demonstrated that digital cash may determine the future of finance. Just as data freely roams the Internet, so have stablecoins become the Internet’s native money, attached to the crypto ecosystem.
As such, one could even say that stablecoins already serve the purpose of CBDC's.
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