A number of private stablecoins have surfaced over the last few years. The Increase in stablecoin use is quite evident from the fact that large corporations like Facebook and JP Morgan are trying to get on the bandwagon with their own projects.
Mostly, stablecoins are used by traders to hedge the price fluctuations of cryptocurrencies. Besides this, there haven’t been many implications in the retail sectors. But stablecoins are much more than just instruments to help cryptocurrency exchanges avoid regulatory scrutiny or tools to enable decentralized finance protocols, according to Circle CEO Jeremy Allaire.
Stablecoins lack a set of standards
In an interview with Ryan Selkis CEO of Messari, Allaire stated that in order for the digital representations of fiat value to transform global commerce, a set of standards, like those that make instant data transfer on the internet possible, is needed.
Allaire believes that stablecoins have various other properties that should be explored. He noted that the next step for the stablecoin space is the adoption in general payments and settlements. In order to achieve this, he believes there should be a set standard to provide guidelines and monitor activities within the space.
Allaire said that the emergence of Visa is an example of how the cooperation of numerous networks under a single standard is what enables the scaling of electronic retail payments. He is confident that stablecoins will be even more revolutionary than how electronic payments were in the last century. Programmable money, lacking the volatility of assets like Bitcoin, makes all kinds of new financial relationships possible.
Furthermore, Allaire was in favor of regulatory scrutiny in the stablecoin sector. He noted that Facebook’s proposal of Libra has managed to attract a lot of this scrutiny, but that hasn’t been much fruitful for the project.
Allaire has always been an advocate of stablecoins and he has been leading Circle just that way. After Circle sold its OTC desks to Kraken last month, the company noted that it would now focus on its “core strength,” which is its “platform services infrastructure” according to the CFO’s. It further stated that the infrastructure has supported the USDC stable coin over the years and it will supposedly support global payment, custody and stablecoin wallet APIs.
Are CBDCs a threat to private stablecoins?
The stablecoin market is changing rapidly as now multiple nations are eyeing the use of Central Bank Digital Currencies (CBDC). As more and more government bodies are eyeing state-backed national cryptocurrencies, some see this as a threat to the existing stablecoins.
Samson Mow, Chief Strategy Officer of blockchain technology company Blockstream, had said at the Blockshow conference that stablecoins would never see a retail use case, contradicting what Allaire believes. According to mow, stablecoins are just a step towards “hyperbitcoinization” and it is all a “temporary thing.” He further explained:
“The main threat they face is from the national cryptocurrencies. How open will those national cryptocurrencies be? …But stablecoins will then have no reason to exist with a national cryptocurrency.”