In our article Libra Association: a Menace and an Opportunity for Blockchain Ecosystems our main take away was that creating new stable coins is an unstoppable trend and a weapon in a new kind of cold war between great powers, especially between the US and China. Fast forward a few months and we are seeing an acceleration of digital currency initiatives based on decentralized technologies in many regions (see The Economy Needs a Programmable Digital Euro! for policy influencer insights). The most challenging aspect of these permissioned systems is not blockchain technology but rather how regions and/or organizations who usually compete with one another can reach political consensus. If they successfully cooperate on a common, accessible protocol, financial innovation will be much easier.

The common narrative is that governments and banks around the world are afraid of traceable cryptocurrencies like Bitcoin or anonymous ones like Monero, Zcash, and Grin. They should be more wary of a plethora of stablecoins like Tether (USDT), DAI, and USDC which are based on permissionless blockchains and are gaining users. USDT alone beats practically every other cryptocurrency in market capital except Bitcoin, Ethereum, and Ripple. Stable coins are also responsible for much of the transaction traffic on Ethereum with USDT currently listed as the number one token there. A few months ago, USDT even produced a traffic jam on Ethereum which interfered with zillions of smart contracts and transactions. To get around this issue, Tether will soon be using the Algorand blockchain, which is 45 times faster than Ethereum through immediate transaction finality. Money on Chain will soon be offering DOCs, the first Bitcoin stable coins which use the RSK Bitcoin sidechain. Stable coins in permissionless blockchains are not only challenging the status quo of financial institutions but also pure cryptocurrencies themselves. The Bitcoin white paper begins by stating that “A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution”. Companies like BitPay continue to focus on Bitcoins as a medium of exchange, while much of the Bitcoin community now promotes them as a store of value. See How the Major Bitcoin Narratives Changed Over time. The irony is that it is more practical to use stable coins for global transfers than the volatile currencies in the permissionless blockchains that host these stable coins. Furthermore, stable coins are centralized, but they take advantage of the interoperability features and open finance capabilities in decentralized blockchains. Openness and interoperability have become more important than decentralization.

Stable coins have become much more widely accepted over the past few months. The Libra proposed by Facebook has diverted attention from stable coins like USDT and USDC, which are already in use. USDT has the largest market capital, while USDC is clearly regulated in the US. Neither required congressional hearings for their approval. Stable coins are part of a larger context: Silvergate Bank, which welcomes crypto, went public this month on the NYSE. They work with leading digital currency exchanges.

While using cryptocurrencies to transfer money becomes simpler, as I write, HSBC and Argentina’s Central Bank regulations require that we print, fill out, sign, and personally deliver the form below to send a relatively small payment from our company CoinFabrik in Argentina to a WPP company in Uruguay in the context of the Latin American Bitcoin & Blockchain Conference. Payment with cryptocurrencies, stable or not, does not take up people’s precious time, it is almost instantaneous and the fee is negligible. This situation will not last long: regional companies like Bitex are fighting for his place.



