2020 will be the year of stablecoins in the blockchain world. Triggered by the announcement of the Libra project last June by Marc Zuckerberg and followed by the Chinese and European announcements, the race for cryptocurrencies based on a stable value (euros, dollars or mix of several state currencies) as a pivot has started. Nations, banks and the blockchain player are now racing to create stable cryptocurrencies around the blockchain system. What are the issues behind the creation of these very special cryptocurrencies?
Not a day has gone by without a country or economic zone announcing that it has been working on a cryptocurrency since Libra was announced. These projects all have one thing in common: they are stable stablecoin or cryptocurrency.
A stable coin is a currency based on a fixed value like the euro or the dollar and which has no speculative purpose. It allows the exchange of stable value in the blockchain world and allows those who hold it to protect themselves from the sometimes significant volatility of the cryptocurrency market. These stable corners are not new and are a well-known tool in the blockchain world.
Tether: the first of stablecoin
Thus in 2015, the Tether, the first stable corner, was born. Its principle is simple, each time someone deposits dollars to have Tether (USDT), it issues the same number of Tether and keeps the dollars paid in a bank account. You can exchange this token with Tether for $ 1 at any time.
Tether has now become a benchmark project. So much so that it is the most cryptocurrency most traded before bitcoin with more than $ 20 billion in daily volume. Indeed it allows many active crypto to go back and forth between bitcoin and traditional currencies avoiding the bank problems inherent in cryptos (withdrawal / transfer to justify, suspicion of banks and sometimes disagreements). Other notable initiatives exist such as the DAI of Maker DAO: a more elegant technical solution, but less adopted for the moment.
However, doubts will still exist on a cryptocurrency issued by a company. Indeed, it is impossible for a user to know in real time the money Tether has in his bank accounts. Better even if the money was in the bank account of a private company could be used as collateral in order to obtain loans and to invest with these loans in potentially risky assets which can put the company in danger and therefore return the currency obsolete. And in the end, it is not very important whether these actions take place or not, the fact that it is possible to do so creates a risk situation for the person who owns these cryptocurrencies.
The creation of one or more cryptocurrencies of state or issued by a public institution would eliminate these risks and bring classic banking players into the cryptocurrency game as well as facilitate the acceptance of these assets in real life . What initiatives are on the table today and what are their economic interests? What are institutional players in Europe preparing for the blockchain in 2020?
Stablecoins for specific uses in Europe
Today, multiple initiatives are about to see the light of day via state actors or official European institutions. However, each of these projects has its own perimeter and a very precise use. Here are the three most significant ones carried respectively by Libra, JP Morgan, the ECB and the Banque de France.
Currently, many banks are starting to use blockchain and cryptocurrencies to facilitate internal and interbank transactions. This is the case of JP Morgan’s JPM coin or of certain projects at HSBC such as the Digital Vault supposed to be released in April 2020. In this case the stablecoin serves here as an interbank vehicle that you will never have the opportunity to see circulating in outside the banks.
As for public institutions, the Banque de France recently created a surprise by proposing the creation of a currency to be issued by the ECB. This would serve to facilitate exchanges between the central bank and the banks. Again, you would never see this crypto euro in real life.
And finally and finally, a stablecoin project for the general public is being developed at BPI. He is the one you could therefore own. This stablecoin would have the same utility as the Tether project, but offering more confidence, since it was issued by a state institution. However, his interest goes far beyond. Indeed, this crypto euro could become programmable and would allow for example the State to be able to collect the VAT automatically allowing to reduce the possibilities of frauds and to allow a saving of time in the management of businesses.
They could also free themselves from credit card networks such as Visa and MasterCard or even execute payments automatically between them when a service is finished allowing payment deadlines to be met. Many SMEs are in danger every year due to late payment from their customers.
This programmable currency is not in itself a revolution opened by the blockchain. It would be entirely possible to create it with our current system. However, the cost to implement this change is far too great in the conventional system. Launching a euro stablecoin allows you to take advantage of the automation capabilities provided by the blockchain and considerably reduces this cost of change.
Beware of user data
The main issue around stablecoins is related to data. The fact that a private company or a state can know all your expenses is a possibly alarming fact. For example, in the case of the Libra project, fears arise. Libra is organized to be managed by a group of companies. However, Calibra, the electronic wallet that allows its use, would be managed by Facebook and therefore allows Facebook to know the entirety of the transactions carried out by these users.