A Goldman Sachs survey confirmed that institutions’ interest in crypto is growing. The survey found that 40% of the company’s high-net-worth customers are Have been exposed to cryptocurrency. Stable coins-providing a safer and more stable choice in the crypto field-have experienced rapid growth, arrive The market value of 119 billion US dollars. The volatility of cryptocurrencies has attracted more conservative investors to turn to asset-backed stablecoins.
Stable currency is a private currency. As Christina Segal-Knowles, Executive Director of Financial Market Infrastructure at the Bank of England, said, Point out, Modern currency is a combination of public and private funds, and up to 95% of developed economies are private. She added:
“If new forms of digital currencies can be made secure, they may contribute to faster, cheaper and more efficient payments and have more powerful functions. They can increase the flexibility of payments. They can even contribute to finance Stability brings long-term benefits.”
A true stable currency is an interest-free currency designed to have a stable value relative to a reference currency or asset, and it will play an important role in the future of global finance. They provide low-cost, secure, and real-time payments. Doing so can reduce the cost of accepting payments and make it easier for the government to run conditional cash transfer programs, while reducing the cost of remittances and connecting unbanked people to the financial system.
We grew up on the gold standard; it makes sense to create new financial instruments backed by gold and other real-world assets to protect value and allow people to borrow assets as collateral. The global monetary system as we know it is not that old—only 75 years since the Bretton Woods system.
However, only 50 years ago, President Richard Nixon announced that the U.S. dollar would no longer be backed by gold as it has since the Bretton Woods system. Now the system is under threat, not only from the government printing money, as if there is no tomorrow and the recovery of inflation, but also from stablecoins.
Especially Facebook Announcement of the Libra project In 2019, regulators used its potential to become global and access billions of users through its social networking platforms.China is exploring cross-border payments Digital element development, This may extend to more than 50 low- and middle-income countries under the “Belt and Road” initiative. These countries are home to the majority of the world’s population. The launch of the digital renminbi may replace the U.S. dollar as the backbone of the global financial system.
Stablecoins and emerging economies
On the other hand, the potential positive value of stablecoins lies in emerging economies and threatened populations. Think about people watching their hard-earned savings depreciate, or citizens of countries such as Venezuela and Lebanon watching their currencies plummet.Think about the global COVID-19 pandemic Exposing an urgent need Used for low-cost direct digital transmission.
In a recent paper, Catherine Foster and other researchers highlight Stable coins have the potential to promote safe and convenient transactions, are free of volatility, and cost less than mobile currencies in various non-bank wallets. As migrant workers are unemployed, the important development flow of global remittances has declined during the pandemic, so this positive value is urgently needed.Remittance met their worst decline In recent history, it has fallen from USD 554 billion in 2019 to approximately USD 445 billion in 2020, a drop of nearly 20%.
The humanitarian community has also seen the potential and pushed the boundaries of blockchain technology to promote The effectiveness and efficiency of its interventions. Ric Shreves, Director of Emerging Technologies, Mercy Corps, See Stablecoin as a compelling use case: “Imagine if we have a globally acceptable low-volatility and low-cost coin. How will this affect our work? It may affect our work, from the background operation, we Shifting funds to difficult places, to actual direct distribution, and then to our program participants, there are many very compelling use cases for this technology.”
Developing countries are already accepting encryption.The 10 countries with the most cryptocurrency users in the world include Kenya, Nigeria, South Africa, Venezuela, Colombia and Vietnam.The latest cryptocurrency report of the financial product comparison website Finder also reported that emerging economies such as Vietnam, India, and Indonesia are Leading the way in the crypto adoption raceThe trend of consumers in emerging markets in Latin America, Africa, and East Asia to switch to crypto may retain savings they may have lost due to economic turmoil.
Stablecoins and the new financial order
Building a new decentralized financial system with stablecoins will fundamentally change the way people save and use assets and money. Here are some reasons:
- Stablecoins have the potential to overcome major shortcomings and frictions in existing cross-border payments, which are essential for remittances and reducing remittance costs.
- As countries recover from the catastrophic consequences of the global pandemic through currency distribution, stablecoins can promote welfare, such as the current stimulus plan distributed to millions of unemployed during the COVID-19 outbreak.
- Stablecoins can have a positive impact on financial inclusion-using electronic money for payments and savings will enable people to build a digital history, which is essential for obtaining credit.
- Stable coins can expand cross-border trading opportunities for small and micro enterprises.
- Commercially issued stablecoins can provide an alternative to those who do not have a bank account, and provide greater stability by giving them access to a store of value, enabling them to save without overcoming the barriers to entry into banking services .
Sofie Blakstad, founder and CEO of hiveonline, said: “Unfortunately, we will face more humanitarian crises due to COVID-19.” “And our money will also decrease. Therefore, it is time to really use technology to prove how we can achieve these goals at a lower cost.”
Stable coins and challenges
There are obstacles to achieving this goal. Despite their names, Stable coins do not guarantee stability. Stablecoins lack a unified standardized taxonomy.The U.S. Federal Reserve calls for Comprehensive regulatory framework For stablecoins. and, Any solution needs to be solved Consumer protection, financial stability and financial crime prevention. In addition, different economies, jurisdictions, legal systems and different levels of economic development will face regulatory challenges. These challenges require coordination of legal and regulatory frameworks that govern data use and sharing, competition policy, consumer protection, and digital identity.
F. F. Christopher Calabia, former Senior Vice President and Head of Banking at the Federal Reserve Bank of New York, asked five key questions problem In his paper “Can the poor use stablecoins?” he talked about the potential of stablecoins for the poor. These important questions are: For the poor, is the processing speed of stablecoins fast enough? Will the technology available to the poor support stablecoins? What price will stablecoins cost the poor? How will stablecoin issuers comply with electronic currency regulations? How will a financial system with limited foreign exchange reserves adapt to stable currencies?
We need innovators to understand the financial needs of the poor and develop valuable tools for them. At the same time, we need regulators to reconsider who can provide services and how to provide services. Today, we are in the age of exciting experiments about “reshaping money”, how we use it, and how people obtain it.
With proper supervision, stablecoins can be used safely and widely, and their promises can be fulfilled by getting more funds into the hands of those who need it most. In order for stablecoins to be useful to the poor, they need to be widely adopted by consumers, merchants, businesses, and governments. With a deliberate, purposeful, and nuanced understanding of the needs of the poor, the blockchain community has the technology and spirit to do this.
This article does not contain investment advice or recommendations. Every investment and trading action involves risks, and readers should research on their own when making a decision.
The views, thoughts, and opinions expressed here are only those of the author, and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Jane Thomason Is a thought leader of the social impact of blockchain. She has a doctorate degree. From the University of Queensland. She has served in the Blockchain and Frontier Technology Association of the United Kingdom, Kerala Blockchain Association, Africa Blockchain Center of Excellence, University College London Blockchain Technology Center, Blockchain Frontier and Fintech Diversity Radar. Position. She has written many books and articles on blockchain. She has been selected as one of the top 100 women in the encryption field, the top 10 women in the digital frontier, the top 100 sustainable development goals fintech influencers, and the top 50 blockchain global thought leaders and influencers.