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Stablecoins – Are they Gimmicky or Trendy?

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Stablecoins - Are they Gimmicky or Trendy?

Stablecoins

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.

Gimmicky?

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.

Cannabis

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.

Shipwrecked Gold

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.

ICO Founded on Gold Suspected of Fraud

Trendy?

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.

Market Dominance

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.

Stablecoins within Digital Securities

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.

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Joshua Stoner is a multi-faceted working professional. He has a great interest in the revolutionary 'blockchain' technology. In addition to this, he is a licenced Paramedic in Nova Scotia, Canada. As such, he can provide emergency care/medicine to any situation necessitating it.

Blockchains

Raiffeisen Bank in Cooperation with FinTech Billon to Pilot Digitized National Currency

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Raiffeisen Bank in Cooperation with FinTech Billon to Pilot Digitized National Currency

The transformation of the payments industry is in full swing. Driven by FinTechs, the payments technology innovation brings new ways of transacting on a global scale, with easier on-boarding, reduced waiting times and lower fees.

It’s no surprise that FinTechs also experiment with blockchain-based platforms that allow for tokenized representation of assets. One such platform is being developed by Billion, a British-Polish FinTech that is currently working with Raiffesen Bank on end-to-end digitized national currency transfers.

Raiffeisen to Pilot Digitized National Currency Project

According to a report, the Austrian banking giant successfully tested Billon’s tokenization platform, dubbed RBI, and moved the project from a proof-of-concept to a pilot project.

Borne out of Raiffeisen Bank International’s (RBI) Elevator Lab acceleration program, the tokenization platform is based on Billon’s distributed ledger technology (DLT) with the goal to enable tokenization of national currency.

Billon was founded in 2015 and is a FinTech company working on integrating national currency transactions, document and identity management tools into a single architecture.

The goal is to bring blockchain capabilities into the regulated world. This is in line with the global trend of commercial and central banks building blockchain-based infrastructure that comply with payment and data regulations.

FinTechs Augmenting Banks

The system from Billon enables banks to complete transactions that have higher settlement speeds, accurate payment status, reduced exception handling and as a result reduce customer inquiries.

Transactions with this system can have additional data or documents attached to them, accelerating the verification and validation process for e.g. the source of funds. Consequently, transfers are quickly settled and cleared while maintaining a clean audit trail and full transparency.

Both Billon and Raiffeisen Bank International plan to pilot the digital currency by the end of this year. The trial is set to include RBI’s corporate and institutional clients. Should the test period be successful, the Austrian bank could start using it in Central and Eastern European (CEE) countries where it has an extensive presence.

Stefan Andjelic, blockchain hub lead at Raiffeisen Bank International, spoke of the necessity of banks having to partner with FinTechs to meet new consumer demands:

“Billon is a great example of a fintech that understands how to adapt blockchain to serve the needs of banks and their clients. Specifically, during the COVID-19 situation, banks need to partner with fintechs to innovate faster and help clients with payments processing and liquidity needs.”

The full extent of the benefits from a tokenized platform are yet to be felt when deployed in a full working environment, but Billon expects the bank to improve customer experience, differentiate its offering and achieve cost efficiencies at several steps during the process.

Blockchain and Banking

There is a noticeable trend amongst commercial and central banks to develop new payment rails and exploring blockchain-based solutions.

Among the first household names in the financial world to entertain the idea of a digital currency was JP Morgan with its own JPM Coin that is marked for settling internal transfers for its corporate clients. Nonetheless, up to this day there is no update from the banking giant about fully deploying the JPM Coin.

At the same time, many central banks across the globe are taking decisive steps to launch their own digital currencies, clear examples being People’s Bank of China with the digital Yuan and the Banque de France testing a digital version of the Euro.

At the highest level, institutions are studying the feasibility of digital currencies and how these can be implemented in the current monetary environment.

VISA is another company whose involvement with digital currencies testifies the looming change in how payments are made. The payments giant has also filed for a patent in the United States to develop a digital fiat currency.

The Trend to Go Digital

The willingness to bring forth a digital version of a currency has also been exacerbated by the current COVID-19 pandemic. Transitioning to an almost fully digital experience could become a prerogative for many companies.

In the wake of the pandemic outburst, the Bank for International Settlements (BIS) published a report on how physical cash could transmit viruses, including the COVID-19. As a result, the BIS advised financial institutions to utilize digital methods of payment transactions, while advocating for central bank digital currencies (CBDC).

With this new blockchain-based initiative with Billon, Raiffeisen Bank is definitely on track to bring better digital payment methods to their offering.

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France’s Central Bank Completes Security Issuance with Digital Euros

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France's Central Bank Completes Security Issuance with Digital Euros

A major milestone towards the launch of a Central Bank Digital Currency (CBDC) was achieved in Europe, and more specifically in France.

The acceptance of a digital currency on a global or even on a national level was perennially viewed as a pipedream. Nonetheless, even after dismissing the biggest digital currency in the world – Bitcoin – nation states and central banks started to pay more attention and work on their own currency’s digital version.

While several countries have made some progress, China is known to be at the most advanced stage for launching its own CBDC. At the same time, news of a successful test for a digital Euro comes from France’s central bank.

Banque de France Unveils CBDC Progress

The Banque de France unveiled that it used the blockchain developed by its own team to settle the issuance of digital securities, using end-to-end blockchain infrastructure.

This first successful test was done in partnership with one of France’s biggest banks – Société Générale. In what is called a covered bond issuance, the total value reaches the €40 million (~$44 million) mark.

This becomes a noteworthy milestone for digital security issuance, since the transaction was instantly settled via the delivery versus payment (DvP) method directly against digital Euros.

Société Générale has lauded the results of the test and is highly optimistic in regards to the benefits digital currencies can bring, saying “It paves the way for the automation and shortening of payment processes, with simplified market infrastructures and strengthened security.”

According to reports, the central bank digital currency is one to be used for interbank settlements, rather than consumer payments. With the positive outcome of this initial test, Société Générale is encouraged to undergo more rigorous testing in the coming weeks:

“This experimentation was performed end-to-end using blockchain infrastructures…It demonstrates the feasibility of financial securities being digitally settled and delivered in Central Bank Digital Currency (CBDC) for interbank settlements,” stated Societe Generale.

This also becomes a huge milestone for the Banque de France. The central bank’s ambition to test a digital currency was voiced late last year in December 2019, stemming from a political will to take on a leadership role within the European Union.

France’s Efforts on a Digital Euro Paying Dividends

The development activity and the encouraging test results around the digital Euro coming from Banque de France are cementing the country’s place at the forefront of digital financial securities landscape.

Banque de France said it will continue to do more tests with other financial institutions over the next few weeks, as part of its ongoing exploration of a digital Euro.

“The results of these experiments will be an important element of the Banque de France’s contribution to the more global reflection led by the Eurosystem on the interest of [a CBDC],” stated the central bank.

It’s not too long ago that the central bank launched its digital Euro programme. In April, the central bank said it aims to uncover the benefits of digital currencies for clearing and settlement of tokenized financial assets.

The central bank shared that since the programme launch, there have been a lot of applications and interest to test the central bank digital currency, emphasizing the leading role the country has in payments technology innovation.

This current iteration of the central bank digital currency is being earmarked to be used for and by financial institutions – not retail payments. At the time of the programme launch, the central bank said it is not looking to replace coins and banknotes.

According to the central bank’s governor, the consumer side would have to be complemented by a different digital currency that focuses on usability and may not be underpinned by blockchain technology.

The Race for the First Central Bank Digital Currency

France is not the only country to have started testing central bank digital currencies. Last month, China finally confirmed it had begun testing its digital Yuan in four cities. According to the People’s Bank of China it started researching CBDCs as far as 2014, and finalized a basic design back in January.

If governments were adamant of adopting a digital currency, now it seems central banks are racing to be the first-to-market. It’s not surprising as well, since a successful digital currency issued by a major central bank could be used as an international currency – potentially weakening the role of existing currencies, like the U.S. dollar.

Monetary experts have voiced their thoughts that a digital asset used on a global scale could significantly reduce the influence of the U.S. dollar on global trade and weaken its position as a world reserve currency.

Whether this will come from a digital currency built by a central bank or from a neutral digital asset like Bitcoin, it’s clear that the world of financial securities is set to go through a seismic change.

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Libra Project Appoints First CEO – Stuart Levey

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Libra Project Appoints First CEO - Stuart Levey

Appointed

Progress is being made at the Libra Association.  A search committee, tasked with appointing their first leader, has just announced their decision.

Stuart Levey has been named the first CEO of the Libra Project.

Stuart Levey - CEO of Libra

Past Successes

While he might not be a household name, Stuart Levey boasts an impressive resume, making him an ideal fit for the position.

Notably, Levey served as the ‘Under Secretary of the Treasury for Terrorism and Financial Intelligence’.  He held this position for many years, performing well enough to be kept on through multiple administrations, which included, both, Bush and Obama.

More recently, Levey took a position working for HSBC as their Chief Legal Officer – an impressive position in its own right.

Cumulatively, these experiences, and more, have provided years of experience dealing with the world of finance in varying capacities.  Whether structuring government regulations, or immersed in banking practices, Levey has found success.  Now, Libra hopes this trend will continue, and that Levey will lead the project to a bright future.

Commentary

When the search for a CEO began at the Libra Association, a search committee was put in place to oversee the process.  Leading this group was Andreessen Horowitz General Partner, Katie Haun.  Upon announcing their decision, she had the following to say,

“Stuart brings to the Libra Association the rare combination of an accomplished leader in both the government, where he enjoyed bipartisan respect and influence, and the private sector where he managed teams spread across the globe. This unique experience allows him to bring a wealth of knowledge in banking, finance, regulatory policy and national security to the Association and strike the right balance between innovation and regulation.”

She continued,

“Stuart shares our vision for using blockchain technology to deliver a more open, inclusive and high-functioning payment system that puts crypto in the hands of billions around the world.”

Time of Change

The announcement of their first CEO marks an important development for the Libra Project.  While the project got off to a rocky start, due to skepticism from various levels of government, the project appears to be gaining steam again.

This skepticism has led to, essentially, a Libra 2.0 being drafted and put forth, marking important growth in project development.  With being in a state of flux, clear and competent leadership is a must.

Yet to be Quenched, Libra Still Being Forged through Criticisms and Growth

Libra

The Libra Project is an endeavour being spearheaded by Facebook.  The overarching goal of Libra is to facilitate financial inclusion.  The approach being taken, in an effort to achieve this, revolves around the creation of various stablecoins accessible to all.

In Other News

Beyond the announcement of Libra 2.0, and now a new CEO, the Libra Project has seen multiple ‘boosts’ in the past few months.  These revolve around a ground membership within the Libra Association, as, both, Shopify and Checkout.com have joined the ranks.

Checkout.com Eyes Financial Inclusion, Joining Libra Association

Libra Sees E-Commerce Giant, Shopify, Join the Ranks

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