Ready Steady Go: On Your Marks for the Stablecoin Steeple Chase

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With Japanese regulators confirming that stablecoins do not fit the definition of cryptocurrencies outlined in the country’s Payment Services Act, the stablecoin chase seems well and truly on in that country and, so it appears, everywhere else.

As Bitcoin News reported yesterday, according to the FSA, firms issuing stablecoins in Japan need not register for licenses, though they may need to register for issuing payment instruments. Significantly, this clarification of the FSA’s 2017 guidelines means that large stablecoin transactions, up to JPY 1 million (around USD 9,000) can be made unhindered by the same guidelines which apply to other transactions.

A stablecoin is a cryptocurrency pegged against something of widely-accepted value such as a state currency, typically the US dollar, giving it price-stable characteristics. It is seen by some as a safe hedge against the volatility of conventional cryptocurrencies such as Bitcoin or Ethereum. Currently, they are underutilized apart from traders using them to guard their positions during bear markets.

What is the current state of play in the apparent rush towards stablecoins? There seems to be no stopping the charge as the London Block Exchange (LBX) announced its plans to launch the LBXPeg, a stablecoin backed by the UK pound recently.

LBX has stated the current stablecoin market needs disruption due to many firms’ lack of transparency, commenting that “many available stablecoin offerings are inadequate for the needs of businesses, traders and consumers” and citing “opaque management structures, distribution schedules, and auditing processes”.

Nick Tomaino, founder of @1confirmation, calls stablecoins “the holy grail of cryptocurrency”, suggesting that coins such as Bitcoin were too prone to volatility. Tomaino suggests that the US dollar is a fiat working example of stability. The dollar falls down as a stablecoin, primarily because it lacks user control being dependent on the Federal Reserve and the US banking system.

The Winkevoss Twin would clearly agree with Tomiano’s “holy grail” epithet, given their recent success with the New York regulator. The Gemini Dollar, launched by the Winklevoss twins, will allow users a one-to-one exchange on the US dollar on the Ethereum blockchain.

A Hong Kong-based blockchain investment firm is also planning to launch a new stablecoin backed by the Japanese yen. The company, Grandshores Technology Group, will launch the funding round in late 2018 or early 2019. Grandshore feels that the stablecoins will have mileage on release. It argues:

“We believe cryptocurrency traders and exchanges will be potential takers of these stablecoins… We are entering the next stage of blockchain evolution, a stage which is akin to when computer operating system was transiting from MS-DOS to MS-Windows.”

Australia company Bill Trade, which launches its own coin next year, sees stablecoins as solving “one of the principal issues that may drive investors seeking steady returns and merchants that currently accept traditional currency away from digital currencies: volatility”.

The chase is on.

 

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