What comes to your mind when you hear the word ‘cryptocurrency’?
- A better financial system?
- A secure way to transfer or store money?
- Or maybe the wild price fluctuations – promising highs and painful lows that we go through every week.
Stability would probably be the last thing that comes to your mind. Yet, 2019 is turning out to be the year large institutions invest in stablecoins.
Investopedia defines ‘stablecoins’ as:
“A new class of cryptocurrencies which attempt to offer price stability and/or are backed by reserve asset(s). Stablecoins have gained traction as they attempt to offer the best of both worlds – the instant processing and security/privacy of payments of cryptocurrencies, and the volatility-free stable valuations of fiat currencies”
This explains why over the past 2 months, there’s been so much happening in the stablecoin market with giants like Facebook, Walmart, and Binance all announcing plans of their own fiat-backed digital currencies.
Facebook’s blockchain initiative started way back in 2017 with Morgan Beller who was initially the only person working in the new division. By February 2019, more than 50 engineers were working on the project. On June 18 2019, Libra was formally announced as a token backed by a basket of currencies, and US Treasury securities in an attempt to avoid volatility.
Scheduled to launch in 2020, Libra has already faced the wrath of regulators from around the world.
While Libra’s promise of near free, instant global payments seems promising, critics have already raised eyebrows regarding the level of decentralization and regulatory hurdles that the project will face.
On August 1st 2019, Walmart filed for a USD-pegged stablecoin patent.
As one of the most active players in the blockchain space, having filed at least 54 blockchain-related patents to date, Walmart now seems to be eyeing the stablecoin market.
Like Libra, Walmart with its stablecoin aims to “handle wealth at an institution that can supply the majority of their day-to-day financial and product needs”
While Facebook made a grand announcement about their stablecoin with long documentations and company blogs, very little is known about Walmart’s stablecoin intentions.
The latest entrant in the race for stability is none other than Binance. Binance announced Venus on August 19th 2019, just days after the Walmart filing.
While Facebook announced Libra as a global currency, Binance seems to be positioning Venus as a regional stablecoin running on Binance Chain
Another key difference is that instead of announcing partners, Venus is seeking partnerships with governments & business to make new local stablecoins.
By taking a local approach, Venus may not face global regulators during its early stages of launch making the process much faster for the Venus ecosystem.
CZ, the CEO of Binance, even went on to say that he would like Venus to co-exist with Facebook’s Libra, making the stablecoin market even more dynamic in the months to come.
So we now have Facebook, Walmart, and Binance competing for the same prize.
While it’s anyone’s guess as to who turns out victorious, we feel that the key to succeed in this market for any of these behemoths will be to get the first mover advantage and make regulators a part of the ecosystem by deeply involving them in the success of the project.
What do you think?