These blockchain based assets known as stablecoins, are digital tokens which are pegged to another asset. This pegging usually links the digital assets to FIAT currencies on a 1:1 basis, attempting to mimic their stability.
The entire purpose of these assets is to provide investors with a blockchain based form of payment, while experiencing a reprieve from the volatility often associated with cryptocurrencies.
These qualities have made stablecoins perfect for use in STOs/DSOs, which have been seen various times, to date.
While most stablecoins to have hit the market are pegged to FIAT currencies, there are various options that have attempted to capitalize on the stability of non-conventional markets. Unfortunately, for those going down this road, most have been viewed as gimmicks, or outright scams. The following are two examples of stablecoins based on non-conventional reserves. One with potential, the other a scam – be diligent when utilizing such assets.
Outside of Crypto, one of the hottest industries is the Cannabis market. With legalization taking place throughout the nation of Canada, as well as various states, acceptance of the industry has never been higher. Strengthening the case for Cannabis is its ability to affect change in, both, recreational and medicinal capacities.
Recognizing this, billionaire Alkiviades David has recently announced a stablecoin to be backed by hemp flower. This stablecoin is a BTC based token which is known as SWX Coin. Strengthening the case for its adoption is the intent of the Swissx Global Hemp Exhange to create secondary markets for the trading of this coin.
This particular offering took place as an ICO in 2018, and was widely viewed as an outright fraud. Korean firm, ‘Shinil Group’, sold tokens to investors which were to function as a stablecoin, backed by gold found in a shipwreck.
Operations were eventually raided by local authorities, and it came to light that the Shinil Group had no idea if these gold reserves even existed.
A growing trend seen in 2019 is the advent of crypto-based savings accounts. Leading the pack, among the various offerings on the market, is BlockFi. Facilitating services offered by BlockFi is, none other than, Gemini. The Winklevoss run outfit provides custodial services for assets invested through BlockFi – bringing clout and reputability through the affiliation with a licenced and respected third party.
Recognizing the importance of stablecoins alongside assets such as Bitcoin, Ethereum, and others, BlockFi naturally supports the Gemini stablecoin, GUSD.
In a recent update to their service terms, BlockFi announced that investors trusting them with their GUSD will receive 8.25% returns on a monthly basis. This outpaces many well managed mutual funds, making this option a very attractive options for investors.
Offerings like this show a real world benefit to investors, that has actually been realized. BlockFi in particular has paid out tens of million in interest over the past few months, moving them beyond the promise phase, and on trend.
Despite the woes, which have plagued Tether over the previous year, the stablecoin market is still dominated by the controversial offering.
While current market dominance by Tether is still strong, alternatives have clearly taken a chunk out of their business. Within the last year, we have seen Tether’s share of the stablecoin market drop from >95% to roughly <75% – a significant drop, showing demand for alternatives.
Tether vs The Pack
We recently took a deeper look at the perception and operational issues being experienced by Tether, and the various options on the market for replacing it. Make sure to check out the following article to learn more about these alternatives, and how they vary from industry-leading Tether.
While one of the stablecoins discussed in the aforementioned article may one day prove to win out as the industry darling, the reality is that the yet-to-be released Facebook tokens, Libra, have the best opportunity to do so. This is due to the sheer exposure and influence that Facebook holds over various markets.
The average person prizes convenience over all else. While there are many that are voicing their displeasure and apprehension towards the Facebook product, to date, when the tokens are eventually released, there will be a pre-existing pool of clients gaining access that simply don’t care about past privacy and security lapses.
Regardless of which stablecoin eventually wins out, there are various viable options out there from reputable companies. Right now, industry participants are spoiled with the amount of competitors, as many attempt to carve out their place within crypto – some gimmicky, some on trend.
As Support Dwindles, Will Libra Flame Out?
Libra : Plagued by Fear and Anger
When first announced, Facebook subsidiary, Calibra, and its digital token, Libra, pointed to a bright future for digital assets.
In the time since, however, Calibra and its two proposed tokens have been met with nothing but fear and hostility – with much of it warranted.
Despite a lawsuit, and dwindling support levels, those behind the project remain adamant that they will make it work. While this may appear foolhardy, at first, it is important to remember the power held by the company organizing the entire venture. To be frank, Facebook has the financial capability and influence to make this happen on their own.
As stated, since announcing their project, Facebook and their subsidiary, Calibra, have experienced a tumultuous few months. As a result of on-going scrutiny towards the project by government officials around the world, we have now seen at least 6 of the major backers behind the project withdraw.
The following are a few of the statements issued to news outlets such as CoinDesk, Financial Times, and more, by some of those withdrawing from the project.
- “We remain supportive of Libra’s aspirations and look forward to continued dialogue on ways to work together in the future. Facebook has been a longstanding and valued strategic partner to PayPal, and we will continue to partner with and support Facebook in various capacities.”
- “MasterCard has decided it will not become a member of the Libra Association at this time. WE remain focused on our strategy and our own significant efforts to enable financial inclusion around the world. We believe there are potential benefits in such initiatives and will continue to monitor the Libra effort.”
- “Visa has decided not to join the Libra Association at this time. We will continue to evaluate and our ultimate decision will be determined by a number of factors, including the Association’s ability to fully satisfy all requisite regulatory expectations… Visa’s continued interest in Libra stems from our belief that well-regulated blockchain-based networks could extend the value of secure digital payments to a greater number of people and places, particularly in emerging and developing markets.”
- “Stripe is supportive of projects that aim to make online commerce more accessible for people around the world. Libra has this potential. We will follow its progress closely and remain open to working with the Libra Association at a later stage.”
- “We highly respect the vision of the Libra Association; however, eBay has made the decision to not move forward as a founding member…this time, we are focused on rolling out eBay’s managed payments experience for our customers.”
Despite the loss of these big players, Calibra remains well backed by a slew of others, such as Coinbase, Uber, Spotify, and more. Will these companies, and others, follow suit and abandon ship?
Further complicating the situation surrounding Calibra and its two tokens, is the recently announced lawsuit against the company.
Current, a New York based financial service provider, has filed a trademark infringement suit. More specifically, the company believes that Facebook copied their branding, and used it for their own purposes. The following images show the icons used by each company, with obvious similarities being evident.
While this situation is still in its early days, it will do nothing but complicate an already complicated situation. Time will tell what effect this potential trademark infringement has on the viability of Calibra, overall.
A subsidiary of Facebook, Calibra, was launched in 2019. This project was built to act as a digital wallet for supporting the Libra stablecoin as an eventual global currency.
For a more thorough look at the project, and the two tokens it is built upon, make sure to read the following article.
In Other News
Over the past few months, we have covered multiple developments pertaining to Calibra and their respective tokens. We will continue to do so as the situation unravels. For now, here is a brief look at the progression of acceptance experienced by the project.
SEC Sees Pressure to Label Libra Security Token
This week a closed congressional session was held to update members on recent developments in the crypto sector. Not surprisingly, lawmakers choose to focus primarily on Facebook’s Libra token. To that end, congressional members pressed the SEC for an answer to whether or not Libra would fall under current securities regulations.
The session was held by the Committee on Financial Services on Sept 24, in room 2128 of the Rayburn House Office Building. Five SEC commissioners participated in the meeting including Chairman Jay Clayton, Robert J. Jackson Jr., Hester M. Peirce, Elad L. Roisman, and Allison Herren Lee. Notably, the official title of the meeting was “Oversight of the Securities and Exchange Commission: Wall Street’s Cop on the Beat.”
After a brief discussion regarding the shift from public offerings to private crowdfunding campaigns, the board began discussing cryptocurrencies. Committee members pointed to the April 2019 guidance which the SEC released to help investors determine if a token falls under securities regulations. They then applied the guidance to Facebook’s strategy
According to Facebook’s Libra whitepaper, Facebook intends to use its digital currency to facilitate the growth of its internal economy. There will be two types of Libra tokens. The first is the Libra Investment Token which is offered to association members only. Notably, all association transactions are backed by actual bank deposits and government securities. These securities are to be held in the Libra Reserve. The second token is for Facebook users. These tokens are what users can send and receive in exchange for goods, services, or as a means to transfer value. Importantly, Facebook plans to create new tokens only when authorized resellers purchase tokens from the association directly.
As part of Facebook’s initiative, the firm created a non-profit called the Libra Association which is based in Geneva Switzerland. The Association consists of Facebook alongside 27 additional members. Swiss officials have long been supporters of major blockchain products. Consequently, the country has one of the most robust legal frameworks available to blockchain investors. In the past, Facebook cited this pro-crypto stance to explain the decision to base operations in the country.
Libra Investment Token Issues
The panel considered the Libra Investment Token a security for a couple of key reasons. Firstly, the token is to be sold to investors to fund startup costs. Also, this token provides dividends to investors. On the utility token variant, the SEC was vague. The SEC stated that the token may also be a security if it’s somehow integrated into the Libra Investment Token strategy. Another point of confusion was when the SEC attempted to determine if Libra token holders “had a reasonable expectation of profits.
Consequently, SEC regulators are undetermined at this point where to place this token since Facebook doesn’t plan to pay dividends to these token holders. Also, problems may arise when crypto payments are used as a global money transference system. In this scenario, Libra could fall under E-money licensing requirements in the US.
Congress is Not a Fan
As it stands, lawmakers want to ensure Libra falls under as many regulations as possible. The overall tone is one of concern and distrust. Facebook will need to overcome these obstacles prior to a US launch.
Authorities Weigh in on Facebook and their Stablecoin, Libra
In the past few days, there have been multiple developments pertaining to the anticipated Libra token – a to-be-released stablecoin by Facebook subsidiary, Calibra.
These developments surround, not only the actions of Calibra themselves, but how the token will be received in a variety of nations.
As suspected by many, not everyone intends to welcome the stablecoin with open arms.
Although not surprising, it was recently confirmed that Calibra has, indeed, filed within Switzerland for the appropriate licensing, to be designated a payment system.
This filing prompted FINMA to release statements confirming the filing, and how exactly they view the project with regards to regulations through a new ‘stablecoin guideline’
This guideline, which builds upon similar ones previously released, which pertain to ICOs, can be found HERE.
French Fury and Scrutiny by the Swiss
The aforementioned filing by Calibra has prompted, not only statements from regulatory bodies, but from high profile individuals as well. Here are a few of those statements touching on the project.
The Swiss Financial Market Supervisory Authority (FINMA), stated,
“The highest international anti-money laundering standards would need to be ensured throughout the entire ecosystem of the project… For bank-like risks, for example, bank-like regulatory requirements would apply.”
The French Economy and Finance Minister, Bruno Le maire, was particularly blunt in his current views on the project. Speaking at a recent conference, discussing cryptocurrencies, he stated,
“I want to be absolutely clear: In these conditions, we cannot authorise the development of Libra on European soil.”
Calibra has not sat idly by as authorities scrutinize their project. Representatives have been quick to defend their efforts, and placate the public at large with assurances of their dedication.
A statement made by David Marcus, Head of Calibra, in front of the U.S. Senate in July sums up their stance well. He stated,
“The time between now and launch is designed to be an open process and subject to regulatory oversight and review…We know we need to take the time to get this right. And I want to be clear: Facebook will not offer the Libra digital currency until we have fully addressed regulatory concerns and received appropriate approvals.”
Acting as a subsidiary of Facebook, Calibra was launched in 2019. This young company was created with the goal of establishing a new digital wallet meant to connect the world through the use of the Libra stablecoin.
We previously took a closer look at the stablecoin discussed here today, and along with the Libra Investment Token, which is to launch alongside it. To gain a better understanding each coin/token, and how they differ, make sure to peruse the following article.
In Other news
Due to its potential to disrupt various areas of finance, and the far reach of Facebook, it should come as no surprise that we have detailed events pertaining to Calibra on multiple occasions. The following articles discuss hurdles being faced by the project, along with views being taken by the Senate.