The Widening Spectrum of Stable Coins

5 min read

The last 12 months or so have seen the resurgence of Stable coins as a popular phenomenon in the Cryptoverse. Although the majority of them are pegged to some sort of physical asset, which in most cases turns out to be a fiat currency, there have been innovations as well. I am going to outline some of the most recent additions to this spectrum and some high-profile ones in the pipeline. Stable coins have acted as a bridge between the traditional paper-based fiat currencies & the digitization of the financial ecosystem while providing the stability that the major financial players are looking for. Here is a list of the top stable coins before moving on to review some of the upcoming projects.

Earning grade Stable coins

➠ Despite solving the problem of value holding & stability, most stable coins come with a very limited ability to trade if any, since the value does not fluctuate like other digital assets. Well, investors now have the opportunity to earn from their stable coin holdings. Holders of the dollar pegged TrueUSD can leverage their tokens to earn interest income. This has been made possible by the stable coin’s developer TrustToken and crypto lender Cred. As part of the CredEarn program, TrueUSD holders in 29 U.S states can participate in this program. The equation is simple – you just have to pledge your TrueUSD holdings for six months to earn up to 8% quarterly interest paid in the same stable coin. The pledged digital assets are used to lend to a wide variety of customer segments including retail investors & professional money managers. The loans are made out on a fully collateralized & guaranteed basis.

➠ A new digital token called USStocks tied to the U.S stock market has been released as a result of a partnership between Decentralized financial contracts platform UMA & Decentralized Autonomous Organization (DAO) MakerDAO. Investors can purchase USStocks token using MakerDAO’s native dollar pegged stable coin called Dai. The platform of choice would initially be the decentralized crypto exchange DDEX. USStocks is an ERC-20 based token representing ownership of an index fund for the top 500 companies listed on the NYSE & Nasdaq. The token ownership represents a bet on the baskets of funds, backed by the stable coin Dai at on over-collateralized ratio of 108.5 percent- initial settlement date is set to May 15th when the USStocks can be exchanged with Dai. While TrueUSD is enabling a direct interest income for investors, Dai-USStocks is giving exposure to the traditional securities through digital token-stable coin combination.

Fiat pegged stable coins

➪An alliance of leading blockchain organizations dubbed the Universal Protocol (UP) Alliance has announced the creation of a Euro pegged stable coin – The Universal Euro (UPEUR). The Alliance includes Bittrex International (Crypto exchange), Brave (blockchain based browser), Uphold (digital money platform), Cred (Crypto lending platform), Blockchain at Berkeley (academic blockchain ecosystem) & CertiK (verification framework for smart contracts by Columbia U.). The Euro pegged stable coin will have multiple functionalities, where you can not only hold them directly hold on Uphold & participating exchanges like Bittrex but will also be accepted by leading crypto custodians like BitGo and Ledger. These platforms will allow you to earn interest on your holdings via the CredEarn program (up to 8% ) similar to the TrueUSD described earlier. With the launch of UPEUR expected sometime in April, it inherits the key features of the underlying UP Platform, namely – Key recovery, Inheritability, Detachability & Dynamic code generation. According to the Press release, the new stable coin would target the unbanked population and/or countries with high inflation to provide a hedge against loss of value. The Alliance has already launched UPBTC (Bitcoin pegged) & UPUSD (dollar pegged) stable coins with similar functionalities.

➪The privately held company, behind the widely adopted dollar pegged TrueUSD – second only to Tether, has now decided to issue a Sterling (GBP) pegged TrueGBP. Fiat-based pegging of course means that the circulating supply of digital assets must be backed by an equivalent amount of the underlying fiat currency reserves, which in this case would be British Pound. Stable coins, especially Tether have long been under the radar for not being able to provide independent third party audit to prove the reserves backing. To address this specific situation TrustToken is planning to launch a “dashboard” which will provide real-time confirmation of the fiat reserves for the underlying stable coins. Apart from this  the fiat reserves will receive monthly third-party attestations by Cohen & Co. For now, TrueGBP will be available on several OTC platforms like Alameda Research, Bluefirt Capital, QCP Capital, and Galois Capital with listing on other major crypto exchanges forthcoming.

Exchange backed stable coin

➥ The most popular example in this regard is the Binance coin (BNB) – the native cryptocurrency for Binance – one of the biggest crypto exchanges by volume. The launch of BNB has been a resounding success for Binance with its huge user base & the amount of volume traded on the exchange. BNB is actually the 7th largest digital coin by market cap. Taking a leaf from Binance’s book, OKEx, another one of the bigwigs in the Crypto exchange space is planning to launch their own native coin OKUSD. The exchange backed native coin will be developed as a result of a partnership between OKEx & Prime Trust, a blockchain-focused trust company. Not too many details have been revealed about the stable coin but the name OKUSD gives it away that it would be a dollar pegged digital asset. As per the Prime Trust website, it is a regulated, chartered financial institution with strong compliance and AML/KYC procedures. The development of the native stable coin for OKEx is a precursor to exchange’s own blockchain called OKChain, which is in its later stages of development. The test net for OKChain is expected to be launched  in June and this will become the base for OKEx’s upcoming decentralized exchange (DEX). OKUSD will be the medium of exchange on OKChain & the resulting DEX. Keep in mind that Binance had launched its own DEX earlier in February based on the same model which hosts BNB.

Social media ecosystem stable coin

➥ This news comes on the heels of a similar move reported in December that Facebook – World’s biggest social media platform was preparing to launch a stable coin for its popular chat application WhatsApp in India for cross border payments. Now, VKontakte (VK)a multilingual Russian social media giant which has reportedly in excess of 500 million users is planning to launch their own cryptocurrency on similar lines to Facebook. According to the RNS News agency, a final decision has not yet been made though, as the source familiar with the matter revealed:

“…the current configuration of the project involves the creation of individual accounts for the accumulation of cryptocurrency to all users of the social network.”

VKontakte had launched its cashless payment system VKPay in June 2018. The intended cryptocurrency will act as an exchange mechanism for the users of the platform where they can accumulate it for performing different activities on the platform, apart from sending it to each other & also use it to buy good and services on the platform. Early stages for these projects, but these social media platforms like Facebook & VKontakte certainly won’t have to worry about the adoption of these native digital currencies with such huge user bases. Trust factor remains an issue that would need to be addressed by these platforms.

Commodity pegged stable coin

➥ And finally staying in Russia, where news of comprehensive legislation for trading digital securities & cryptocurrencies seem to be taking shape, another palladium pegged stable coin is in the conception stage. Russian billionaire Vladimir Potanin, CEO of the world’s largest palladium producer Nornickel plans to introduce a stable coin on the digital platform which will be developed by the company. All of this will of course will be binding on the regulatory approval of the project by the Russian authorities & the central bank. However, the project seems more concentrated on streamlining the trade of the underlying commodity rather than having a global outreach or utility.

As is the case with many of the emerging technologies (figure above), we passed the Crypto hype peak in late 2017 & spent most of 2018 moving towards trough of disillusionment as the interest in the digital assets waned among the population with a deep slump in prices. 2019 has so far provided some relief for the Cryptocurrencies & its use cases of which the stable coins is one dimension. I am not sure if the recent bounce in Crypto prices will confirm the bottoming in price action, but the innovation in other aspects like the Stable coins is certainly pointing in direction of a move towards the slope of enlightenment & Plateau of Productivity.

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Faisal Khan Faisal is based in Canada with a background in Finance/Economics & Computers. He has been actively trading FOREX for the past 11 years. Faisal is also an active Stocks trader with a passion for everything Crypto. His enthusiasm & interest in learning new technologies has turned him into an avid Crypto/Blockchain & Fintech enthusiast. Currently working for a Mobile platform called Tradelike as the Senior Technical Analyst. His interest for writing has stayed with him all his life ever since started the first Internet magazine of Pakistan in 1998. He blogs regularly on Financial markets, trading strategies & Cryptocurrencies. Loves to travel.

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