Stablecoins
A Brief Overview of the IOSCO Stablecoin Evaluation
The Board of the International Organization of Securities Commissions (IOSCO) released a public statement concerning the risks associated with global stable coin projects recently. The regulatory body met on October 30th in Madrid to discuss the new type of cryptocurrencies and the possible effects the coins could have on global economics. The news showcases the growing concerns regulators have towards major tech firms releasing cryptocurrencies, in particular, Facebook’s Libra.
The IOSCO is a leading international policy forum for securities regulators. The organization includes members from across the globe. Notably, the firm’s board includes 34 securities regulators. Today, the IOSCO regulates more than 95% of the world’s securities markets in more than 115 jurisdictions. Consequently, the organization enjoys recognition as the global standard-setter for securities regulation.
Risk vs Reward – Stablecoins – IOSCO
This latest report covers risks and benefits arising from stablecoin initiatives, specifically, stablecoin projects with a potential for global reach. Projects such as Facebook’s Libra create a unique scenario in which a stablecoin could see massive global adoption. In turn, this adoption could upend the current financial markets. Notably, the IOSCO believes many of these projects fall under current securities market regulation.
The IOSCO report begins with an acknowledgment that stablecoins can potentially offer benefits to market participants. These benefits include a more efficient and secure transaction process that extends to consumers and investors alike. Despite the upside of stablecoins, IOSCO believes that potential risks exist in many areas. The areas of most concern include consumer protection, market integrity, transparency, conflicts of interest, and financial crime. Additionally, systemic risks are another of the group’s main concerns.
Standardization – IOSCO
The group seeks to discover what principles and standards could apply to global stablecoin initiatives. The firm proposes a case-by-case approach to the evaluation of these projects. Basically, regulators want to review the rights and obligations conferred by a particular stablecoin to determine if it falls under their regulatory reach. Also, the body wants to ensure that the obligations of the sponsor are understood fully.
Speaking in the report, Ashley Alder, Chair of the IOSCO Board described how many global stablecoin initiatives include features that are typical of regulated securities. He explained that in these circumstances, IOSCO Principles and Standards may apply. Importantly, a project’s structure is the determining factor. This can include disclosure, registration, reporting, and distribution methods.
Ashley Alder – Chair of IOSCO
Alder reinforced his statements after citing the most recent g20 report on the matter. This report points to the inherent public policy and regulatory risks posed by these projects. Alder pointed to the most recent G7 statement regarding stable coins as well. Not surprisingly, the report echoes the concerns of the G20 nations. She spoke about the importance of these statements and the need to move forward with a global initiative.
Collaboration IOSCO
Importantly, Alder explained that his organization will work closely with the Financial Stability Board on any follow-up reports in the works. In fact, Alder plans to work closely with multiple standard-setting bodies to ensure a globally coordinated response to these tokens. Importantly, one of the main goals of the report is to encourage international collaboration as a means to identify and mitigate potential issues as they emerge.
What to Expect
The IOSCO will continue its stablecoin assessment and consideration to better track the effects of these tokens. This research, combined with other researchers, and securities market regulators, should give the organization a better understanding of what to expect moving forward. For now, you can expect to see larger tech enterprises seek to utilize stablecoins to improve efficiency and save on costs associated with fiat currencies.
Circle has long been a name intimately associated with the world of blockchain. Between the vocal nature of their leaders, touting the potential of the technology, and their high profile acquisitions over the past few years, they have often been a guiding light.
The company, however, appears to be in a state of flux, in recent months Circle has sold their interest in crypto exchange Poloniex, key personnel has left, and now, the potential sale of equity crowdfunding platform SeedInvest.
These are significant moves. The changes beg the question, do these developments represent the demise of Circle? Or a strategic restructuring paving the way for a brighter future?
SeedInvest No More?
There are rumblings that Circle intends to pivot their efforts away from crowdfunding. This pivot will reportedly involve the sale of recently acquired equity crowdfunding platform, SeedInvest.
While this has not been confirmed, it is being reported by the popular news outlet ‘The Block’.
It was not long ago that we first reported on the initial acquisition of SeedInvest. This was a move that caught the attention of many, as SeedInvest was one of the leading equity platforms at the time of acquisition. After being acquired by Circle, expectations were sky-high for what the company would achieve in the burgeoning sector.
Ousting Talent
Until recently, the brain trust at Circle was spearheaded by its pair of founders, which acted as ‘Co-CEOs’. This structure served the company well, since its founding in 2013, so it came as somewhat of a surprise in December 2019 when it was announced that Sean Neville, one of the Co-CEOs would be stepping down from his post.
It is believed that with the company reimagining their path forward, the time was ripe for changes in personnel as well. Neville recognized this, and took the opportunity to pursue new endeavours.
On-load / Off-load
Possibly, the downsizing event that garnered the most attention is the sale of Poloniex. This is primarily due to the fact that Circle acquired the exchange for a staggering sum, totalling over $400 million.
While the Poloniex dramatically improved during its time as a part of the Circle family, there was clearly more promise being shown in Circle’s other endeavours.
For more details surrounding the sale of the popular cryptocurrency exchange, make sure to peruse the following article.
Poloniex Branches out from Circle as ‘Polo Digital Assets’
Circling Back
In early 2019 Circle released a retrospective report of 2018, which noted two primary trends they felt would shape blockchain, moving forward – stablecoins and digital securities.
Circle Identifies Stablecoins and Digital Securities as Emerging Trends
We have seen Circle, in the months since, attempt to capitalize on each of these. While its investment in SeedInvest may (or may not) be coming to an end, its work in developing USDC stablecoin over the same time period has clearly paid dividends.
The company states in a recently released paper detailing stablecoins, “global stablecoins offer the potential for a dramatic opening up of participation in global economic activity”.
We took a closer look at Circle’s USDC stablecoin, its competitors, and how this asset class stands to reshape finance in the following article.
Downsizing Summary
The following is a brief breakdown of the various strategic moves made by Circle in recent months.
Sale of crowdfunding platform ‘SeedInvest’ to …?
- Pending
Sale of trading platform ‘Circle Invest’ to Voyager
- 2019
Co-CEO Sean Neville steps down
- 2019
Sale of OTC Desk to Kraken
- 2019
Sale of cryptocurrency exchange ‘Poloniex’ to Asian investment group
- 2019
Hope Remains
While the various events discussed above may come across as steps backwards, there is still hope that Circle knows exactly what they are doing. These moves are, after all, based on the potential shown by USDC, and what it can offer not only Circle, but the overall world of blockchain.
It was not that long ago that most were praising the decision to purchase both, SeedInvest and Poloniex. We trusted Circle’s judgment then, despite how events unfolded, maybe we should trust them now? Time will tell.
Circle
Founded in 2013, Circle is a well backed, financial services, company, which maintains operations in Boston, Massachusetts. Above all, the team at Circle is focused on ensuring the success of their stablecoin offering ‘USDC’.
CEO, Jeremy Allaire, currently oversees company operations.
A Growing Stable
Stablecoins have, thus far, proven to be very useful, and popular, digital assets within the world of blockchain. They provide a reprieve from market volatility, while facilitating easy transfer of value.
This trend has not gone unnoticed, as a pair of Canadian companies – 3iQ & Mavennet – have formed a new venture known as Canada Stablecorp. Their first product release, is a Canadian dollar (CDN) backed digital asset/stablecoin under the ticker ‘QCAD’.
While the blockchain industry has seen an influx of various stablecoins over the past two years, the vast majority have been structured around either USD or assets, such as gold. The entrance of a CDN backed stablecoin, by reputable companies, is a luxury to interested traders, as the ‘stable’ of offerings just became even more diverse.
The Details
As previously indicated, this venture was undertaken by a pair of companies, which when working together, are known as Canada Stablecorp.
The team behind this venture has clearly been hard at work, leading up to the stablecoins recent launch, as the stablecoin is immediately supported through various avenues.
Canada Stablecorp indicates that interested parties can begin using the stablecoin by purchasing through the following outlets.
Naturally, with this venture being undertaken by a pairing of Canadian companies, with the asset being backed by the Canadian dollar, each of these exchanges are targeted, primarily, towards those residing in the Great White North.
Canadian Dollars CDN
Many may wonder why there is a need for a CDN backed stablecoin. There most likely is no one single reason as to why the blockchain industry would demand such an asset. The following are a few varying rationalities behind the move, however.
- Support Local
- Regardless of location, people tend to support local if they can. With blockchain rapidly rising in popularity throughout Canada, an attachment to ‘home’ may give QCAD the edge when Canadian traders decide which stablecoin to use.
- Historically stable
- CDN remains one of the world’s most stable currencies. While it may not retain the clout that USD does, it is widely accepted on a world stage. With the nation often remaining politically removed from divisive world events, the Canadian dollar may be viewed as a safe haven in times of turmoil.
Commentary
Upon announcing the launch of this new asset, only days ago, representatives from each of the responsible parties took the time to share their thoughts. The following is what each had to say on the matter.
Jean Desgagne, CEO of Canada Stablecorp, states,
“We are excited to be creating an important piece of financial market infrastructure for Canada that will serve the digitization of capital markets and provide a robust payment and settlement solution. QCAD represents a significant opportunity to set a new standard of transparency and auditability in digital currencies and will help drive trust and mass adoption of stablecoins.”
Kesem Frank, President of Mavennet Systems, states,
“QCAD is a significant stepping stone for the Canadian financial market, establishing an imperative link to the world of digital assets.”
Fred Pye, CEO of 3iQ, states,
“We believe the future of equity and bond trading in this country will move towards digital rails. QCAD is in a position to act as the settlement mechanism for these next generation solutions.”
A Past Look
Beyond the development discussed here today, we have previously taken a closer look at the various stablecoin offerings on the market. Make sure to peruse the following article to learn more about these assets, and how they hold the potential to underpin the developing digital securities sector.
Stablecoins within Digital Securities
This week, the crypto market saw a major development after the world’s largest stablecoin provider, Tether Ltd announced the launch of its highly-anticipated Tether Gold (XAU₮) token. Tether currently dominates the stablecoin market with a market cap of over $4.6 billion. Now, the firm seeks to transform the gold-backed token arena in much the same way.
News first broke via a post from Tether’s management team. In the post, the firm spoke on Tether’s proven track record for product innovation in the sector. Also, developers discussed the new XAU₮ token and its functionality. Specifically, the post clarified that XAU₮ represents ownership of one troy fine ounce of physical gold on a specific gold bar.
Tether Gold (XAU₮)
As part of the Tether Gold strategy, executives decided it was better to maintain direct control over the physical gold storage. As such, the gold represented by XAU₮ resides in a high-security vault in the country of Switzerland. The post explains that users don’t have to fear the loss of their physically-tethered gold because the vault incorporates best in class security systems coupled with advanced anti-threat measures. In order to make this monumental task a reality, Tether chose to partner with a long-time precious metals trader. For their part, this UK-licensed firm provided the gold for tokenization.
Tether Gold via Company Website
Tether Gold (XAU₮) Tokens
Interestingly, Tether decided to go with a multi-blockchain approach to the market. Currently, XAU₮ tokens are to release in two different coding formats. XAU₮ is available in both ERC-20 tokens on the Ethereum (ETH) blockchain and TRC-20 tokens that live on the TRON network. Importantly, both types of XAU₮ are compatible with the current batch of Tether (USDT) wallets. In this way, XAU₮ tokens can transfer to any supported on-chain address without issues.
Tether Gold (XAU₮) Strategy
As part of Tethers XAU₮ unveiling, the firm made a couple of other important announcements regarding the token. Firstly, XAU₮ is to be the only gold-backed token to not charge custody fees. Notably, this decision improves the profitability of the token. Also, XAU₮ investors get access to a 24-hour dedicated customer support team. As it stands today, developers have not listed what exchanges will support XAU₮. However, developers did invite any interested exchanges to reach out for more details on how to list the token in the future.
Tether Gets Golden
Tether once changed the cryptomarkets forever, and now, it looks as if the firm is ready to do it again. It will be interesting to see exactly how Tether manages and audit this latest venture. In the past, the firm has run into issues regarding its Tether stablecoin accounting practices. Hopefully, the firm learned from those mistakes. For now, the entire cryptocommunity awaits the launch of this unique gold-backed stablecoin.