Right now there’s a global race amongst developers to finalise dozens of new stablecoin projects – a race that will ultimately see the number of stablecoins more than double through 2019.
So what’s driving the urgent development of this relatively new asset class? Most in the industry will tell you they simply just work, for investors and for companies wanting to take advantage of blockchain payment solutions.
According to a blockchain.com research report, as of February 2019 the total market share of stablecoins stands at 2.7% of all cryptoassets, up from 1.5% in September 2018.
There’s around 25 stablecoins currently tradable across the world’s leading exchanges and industry experts predict around 50 more will be developed by the end of the year.
The world’s top stablecoin… And the most controversial
With a market cap of around US$2.5 billion, Tether (USDT) is the world’s top stablecoin and the most well know.
Tether is pegged to the United States Dollar. While the USDT price has remained relatively consistent since being created in 2015, it has at times briefly fallen below parity.
Most people using Tether are professional cryptocurrency traders and institutions who don’t want to hold fiat money on exchanges. The stablecoin allows funds to be moved around quicker and in a more cost effective manner.
Tether has however been shrouded in controversy over the past few years. Its links to the Bitfinex exchange came under a cloud during the 2017 Bitcoin bull run after huge amounts of Tether were issued and used to buy Bitcoin, giving rise to allegations Tether was being used to manipulate the Bitcoin price.
Tether has since been troubled by transparency concerns – skeptics allege the exchange has failed to provide valid evidence that it is holding sufficient USD reserves for each USDT.
New stablecoins and big dreams
Yoni Assia, the Founder and CEO of trading platform eToro, announced on Tuesday – at the Paris Blockchain Week event – that his company has developed eight new currency-backed stablecoins to coincide with the launch of a new cryptocurrency trading platform.
Assia is undoubtedly excited about the digitisation of currencies.
“Eventually all assets will move into native digital form,” he said.
“When I look today at tokenised assets, any type of the assets and the ability to move them in real time, the ability to add an asset suddenly into a wallet that never knew that it could add that asset, and receive that asset again in real time, is revolutionary.”
The eight currencies being pegged by eToro’s new stablecoins are New Zealand Dollar, Japanese Yen, Swiss Franc, United States Dollar, Euro, Great Britain Pound, Australian Dollar and Canadian Dollar.
Assia believes the trend towards stablecoins and asset tokenisation is only just getting started.
“Our vision for the next coming years, is we’re starting a process to basically tokenise the world and it opens a whole new possibilities for tokenised assets, for native digital assets, to be able to do a lot of things that we haven’t done before,” said Assia.
2019 has also begun with major stablecoin development announcements from some of the world’s biggest corporations who want to utilise blockchain technology for peer-to-peer payments.
In February, US Bank JP Morgan announced the creation of the JPM Coin, a stablecoin pegged to the USD that will enable direct blockchain-based payments between institutional accounts.
It’s also been revealed social media giant Facebook is developing a stablecoin to enable blockchain-based money transfers through WhatsApp.
It’s understood Facebook is attempting to raise US$1 billion from investors to get the blockchain payments platform and stablecoin off the ground – over the past few months the company has begun hiring dozens of blockchain and cryptocurrency experts.
Striking digital gold
While the world’s top stablecoins are all backed by currency, there’s a growing number of projects focussing on the tokenisation of gold – making it easier than ever for investors wanting exposure to the popular commodity.
This week, Australian publicly listed company DigitalX, announced a $1.6m deal giving it a 17.5% stake in gold-backed stablecoin developer, Bullion Asset Management Services Pte Ltd.
The company is developing XGold – a stablecoin backed by physical gold bullion.
“XGold will allow investors to purchase, transfer and store fractions of gold bullion at a lower price than through a bullion dealer, replacing the traditional model of gold ownership,” DigitalX CEO Leigh Travers tells Micky.
“All gold bullion tokens are vaulted and insured and will be audited by BDO. Investors who purchase XGold tokens will be able to redeem those tokens for physical gold bullion.”
Travers says stablecoins are currently one of the fastest growing sectors within the digital assets market due to low barriers to entry and “game-changing elements”.
“Stablecoins have many of the advantages of digital currencies such as transparency, frictionless transfer and security without the price volatility that affects digital assets.They can also be easily valued which is a criticism of many digital assets.
“Traditional investors number one rule of trading is protecting their capital and stablecoins provide this opportunity.”
“One of the key drivers for adoption will be working with regulatory bodies as the cryptocurrency market matures.”
CoinMarketCap lists 5 stablecoins pegged to gold and there are dozens of gold stablecoins projects currently underway across the world, however many lack reputable backing and transparency.