Stablecoins Will Bring Growth, But Beware Central Banks: Execs

Stablecoins are set to expand the reach of crypto markets, and have the potential to increase business-to-business efficiency in the coming years—if they don’t become irrelevant, that is.

That’s according to representatives from some of the largest stablecoin projects, who discussed the future role of dollar-pegged stablecoins at the 2020 LA Blockchain Summit today.

First, the bright side: Raghav Chawla, director of product management at Fidelity Labs, noted that stablecoins pegged to the value of their country’s currency offer a simplified way for crypto users and eventually large-scale businesses to transfer value without having to route through a bank or other third party.

“People think in a particular currency, usually a fiat currency from the country they were born in, so they think of a store of value as that currency,” he explained. The leap from US dollar to, say, USD Coin is small, then.

Joao Reginatto, USDC product lead at Circle, reiterated that point, stating that when USDC launched in 2018, it served as an effective on-ramp for new crypto users and provided a halo of safety against crypto asset volatility. (USDC is a joint product of Coinbase and payment infrastructure provider Circle).

Greg Di Prisco, head of business development at the Maker Foundation, which administers MakerDAO, highlighted how Centre’s USDC and MakerDAO’s DAI stablecoins work together to draw new users into the cryptocurrency industry, with USDC focusing on converting fiat deposits into stablecoins and MakerDAO having users “denominate their debts in our currency.”

USDC and MakerDAO’s DAI are two of the largest stablecoins by total supply, with more than 2.5 billion and 550 million in circulation, respectively, according to blockchain data aggregator Coin Metrics. The stablecoin with the largest supply by far, Tether, has more than $12 billion in tokens in circulation.

Now, with steady use, it’s time to look beyond psychological barriers toward new use cases for businesses. 

“We work a lot in building platforms that connect to USDC for developers, where we’re seeing traction for things like settlement for commerce, B2B payments, cross border payments,” said Circle’s Reginatto. “There’s a lot of untapped potential.”

Fidelity’s Chawla agreed that stablecoins have a wide range of use cases for businesses that could even flow down to the consumer level, where Venmo or Paypal could one day use stablecoins to increase the efficiency and lower the cost of making small peer-to-peer style payments.

He also noted, however, that as central banks continue to consider and potentially release digital versions of their own national currencies, third-party stablecoins run the risk of being made irrelevant.

“In terms of central bank digital currencies, once the US government issues its own crypto for the US dollar, then these types of third-party custodian models or decentralized protocols have a future that becomes a little fuzzy,” Chawla said. 

“What’s the role of other USD-pegged stablecoins when you can use the central bank’s digital currency? At least for the next decade or more, though, I think stablecoins will play a pivotal role in progress for the crypto industry.”