Stablecoin are being more popular in crypto economics
There was an announcement that was made on the 26th of September by Circle, that it will be releasing its Stablecoin that will be pegged with the USD. The coin will be ready for trading immediately upon Circles Poloniex Exchange. These coins are sometimes referred to as USDC stablecoins which is collateralized with the USD at a 1:1 ratio. Circle now has more than thirty supporting companies that are willing to offer services and trading support to the stablecoins. There are a few cryptocurrency exchanges that have decided to trade stablecoins on their plarforms.
The stablecoin project of circle began about four months ago when the company circle announced that it has raised approximately $110 million in a funding round. All this money went into the creation and development of the new stablecoin offered by the company.
Goldman Sachs and Circle have been cooperating with each other for some time now, with a very succesful funding round, that was led by the Chinese mining manufacturing company Bitmain Technologies.
Circle acquired the crypto exchange Poloniex earlier this year, for approximately $400 million, which led Goldman Sachs to back a massive fundraising round for the project to flourish.
The Ease of use and convertibility of stablecoins
The possiblity of converting USD into USDC is becoming easier overtime and Circle is pushing the ease of use on its platform. The funds are held by the banking partners of Circle, while the USDC tokens or coins will follow the ERC-20 standard compliant protocol. There will be no fees for the tokenization of USD assets, however, a 0.1% fee will be charged when a USDC is converted back into any fiat currencies. Through the creation of a USDC that was made by the ERC-20 standard on the Ethereum protocol, Circle has made it much more direct for exchanges and wallet providers to add support for any new cryptocurrency.
The company Circle led the development of centre which will ensure that the USDC remains pegged at a 1:1 ratio. This is a consortium that is designed to monitor and regulate USDC issuance of the currency together with many other markets.
Companies that wish to create a USDC must comply with rules and regulations, like sending audited bank statements that provide issuers with enough information of the USD deposits that will maintain a 1:1 ratio.
The development is moving forward
The stablecoin market has been in the news for the past few months because of its ability to make reliable transactions in cryptocurrencies while keeping the price in fiat currencies stable. Circle’s new stablecoin will be following the same path of approval for Gemini and Paxo’s USDC, which will be through the New York Department of Financial Services (NYDFS). There are also a few more start-ups like Carbon and Havven that have also started their own stablecoins.
Stablecoins have begon to gain popularity over the past few years, emerging as a key facture in the development of the crypto market infrastructure. This is because it allows traders to easily move funds in and out of a currency position without triggering any capital gain tax. The USDC provided give traders and exchanges, an easy medium of exchange that does not corelate with the tradional banking or financial system.
Well known stablecoin like Tether is troubled
One of the most well known and functioning stablecoin is Tether (USDT), which has led some to think that the coin can not maintain a 1:1 pegged ration. Some see Tether as an unnecessary systemic risk in the growing cryptocurrency market, and the widespread impact that regulatory actions can have on its growth in the broader market.
The doubts of the Tether stablecoin being a true $ 1 USD pegged cryptocurrency, that holds a $1 USD and a $1 USDT as suggested started in early 2018. This led to a red flag regarding suspicious corporate misgovernance and management. The stablecoin has seen a total issuance of more than 2.8 billion in USDT as of September 26th according to Coinmarketcap statistics.
A report was released by Tether in an attempt to allay the markets about its solvency. The report came from the Washington D.C. law firm Freeh, Sporkin & Sullivan LLP, which was attesting to the firms solvency isssues. However, this seems to have raised more questions than answers as the cryptocurrency is still being traded on exchanges.
Market and Blockchain analysts will be following the progress of the these stablecoins as they grow in the crypto community and adopted in global finance. Whether or not there will be one stablecoin that dominates them all is still something that needs to be discovered, within the active cryptocurrency market.
What do you think about the introduction of stablecoins within the cryptocurrency space? Feel free to leave a comment below.