The Growth & Future of Stablecoins
It was only a few years ago that stablecoins were first making their way into the digital currency market. Since then, it’s the effect on the market has been small. The Stablecoin only benefited the cryptocurrency industry and no other financial markets. However, in today’s landscape, Stablecoin is an entirely different character. Their trading volumes rival that of crypto coins and fiat coins. From all accounts, Stablecoin is acting as the bridge between the standard financial market and the cryptocurrency digital market.
There have been multiple central banks that have expressed interest in creating their stablecoins. Numerous corporations like Facebook, Walmart, Mizuho and various others developing stablecoins for their customers. Financial firms like JPMorgan already have a stablecoin available on the market today. However, these projects are questioned dramatically by legislators and governments. These questions include how the coins will be taxed & regulated in jurisdictions worldwide.
There’s also a significant concern about how company’s like Facebook will maintain worldwide transactions. How will the social media giant possibly be able to provide services to countries like Russia & the United States, without the two functions being separate of one another? Due to political tensions between the countries, white-collar financial crimes could tip the balance and start an economic war.
The Pro’s &Con’s of Corporate Stablecoins
The stablecoins being maintained by corporations could allow for the company to have significant power in world economics. The more people that trade stablecoins through these corporations, the more financial power they’ll have worldwide. It’ll directly feed into their power as a worldwide corporation. Furthermore, clients trading these stablecoins into national currencies will benefit countries worldwide in the valuation of their money.
For example, if Walmart can accomplish their digital currency goals in the US Dollar (USD), then they’ll be able to provide discounted exchanges to consumers. This doesn’t apply to clients in the United States of America, but the entire world. This could allow for individuals in rural areas to engage with the USD for the first time & create a financial portfolio. However, if consumers determine that using the Walmart coin is better for purchasing goods online, then there’s a chance that exchanges will drop significantly. This would prove to be harmful to national currencies & could destabilize the world’s economies.
The Cultural & Political Influence of Stablecoins
These upcoming corporate stablecoins can be connected to multiple national currencies. This’ll create a significant influence on the cultural and political landscapes worldwide. Unsavoury governments like China could use stablecoins to collect financial information on individuals globally. Furthermore, governments like Russia or China could make partnerships with these mega-corporations. Subsequently, this would give the corporations a say in how governments around the world work. Luckily, at this point, there are no indicators that Apple or Google are looking into stablecoins.
There has already been significant pushback against companies like Facebook & Walmart, with the two corporations already being banned in several countries. The only nation showing interest in the stablecoins from these two corporations in the United States. However, the Chinese and Russian governments could change their stance on the WalmartCoin or Libra Coin. Additionally, India is currently debating on banning these coins as well. This would block the companies from over 1.2 Billion people.
The Chances for China’s National Stablecoin Increasing
Many analysts have speculated that Libra & all other stablecoins are being banned in China is because the Chinese Government is developing their national stablecoin. Even though the threat of Facebook is clear, the danger of the Chinese having their stablecoin is far greater. It’s already known that the People’s Bank of China has a development program active for stablecoins. However, all information coming from the application has been blacklisted. It’s speculated that by 2021, China will have its stablecoin launching on worldwide financial markets.
Nicholas Krapel, the Manager of Blockchain for Konstellation Tech, spoke publicly about the Chinese digital currency by saying: “They’ve been researching it for years. They have a Digital Currency Research Institute and a wholly-owned company called Shenzhen Fintech Limited researching it. They have a bunch of patents for it. The Chinese economy is already virtually cashless, so it’s only a matter of time. I’d say either the CBDC or a CSC or both gets released before Libra does.”
Many speculate that Shenzhen Fintech Limited is a secretly run government-enabled company in China. This company will most likely have the right to issue competing coins to these corporations and worldwide nations. There has also been speculation that Huawei, the cellphone manufacturer could lead the way for stablecoins in China. While the Chinese Government officially doesn’t maintain either one of these companies, both have been found working with the Government on projects. Huawei products are known for stealing intellectual property and administering espionage protocols on their devices. Due to this, Shenzhen Fintech Limited is the more likely choice for government officials.
Nicholas Krapel, in an interview with Finance Magnates, continued his comments with: “The Chinese government forced this company out of the Alibaba Group holding structure because they correctly realized that it would be against their national interests for an innovative fintechstartup, perhaps the most innovative fintechstartup (after all, it is already valued at more than Goldman Sachs) that is virtually rewriting the rules of e-commerce and digital money to be owned by non-Chinese (Japan’s Softbank and the US’s Yahoo.”
Krapels comments didn’t stop there; he stated: “Significant Ant Financial stakes are held by all of the Big Four state-owned banks as well as the sovereign wealth funds. I don’t see how Huawei trumps that,” Krapels continued, “But hey! Who knows? A little domestic competition could be good. After all, we have no idea how a CSC will affect consumer buying patterns, investments, etc. Probably there will be more room for a few of these CSC’s in any given economic region. Maybe Shanghai and Hangzhou are where AliCoin starts to gain a base market share. Huawei teams up with their Guangdong neighbour Tencent to do one that forms a base in Southern China. That would be my best guess.”
The Regulatory Limitations for China
The Chinese Government will find that being regulated worldwide will be difficult. The limitations for capital outflow, corporate holdings and secured licenses is significant. Nicholas Krapel explains the complexity of the regulation for China’s Stablecoin in his interview. He stated: “Definitely, any potential China CSC would not be allowed to subvert existing capital controls.”
He continued with: “It’s a little more complicated than this, but it is USD 50k of remittances out for anyone holding a Chinese ID card and more and more the authorities are looking into the reasoning of these remittances. You used just put study or travel. Now authorities are drilling down to see why exactly you need $50k to do that! I think these developments in China would be more about enforcing these capital controls KYC wallets, digitally verified provenance of currency and assets. Then trying to enable easier capital outflows.”
Walmart could Succeed& Facebook could Fail.
There’s a big chance that Facebook’s Libra Coin won’t pass the regulatory requirements, just like the Chinese stablecoin. As such, the one big competitor that as a significant chance at succeeding with their stablecoin in the Walmart Corporation. This would be a positive, as the company’s holdings are more significant than that of Facebook’s & Walmart’s are maintained globally. Their patent was only filed last week, but the expectations for the WalmartCoin are quickly growing in the financial community. Considerably more interest than Libra ascertained.
The late filing of their stablecoin could be ingenious for the company. They allowed for Facebook to take the initial hit of backlash from the finance community & now there is only excitement. Furthermore, Walmart doesn’t have the user data issues that Facebook has had since first created more than a decade ago. This doesn’t mean that Walmart won’t have their image problems to overcome.
Nicholas Krapels on Walmart stated: “I’m waiting to see what Walmart does with their proposed stablecoin. This is a company from the Heart of America, a true epitome of the American Dream, not some evil Silicon Valley geek corporation like Facebook, that is proposing this high-tech concept that is hard-to-understand for many of the hoi polloi. If Walmart keeps pushing this, it could receive a much warmer reception by regulators. Yeah, maybe because FB has primed them to be ready for such a thing, but also because a WalmartCoin seems like a much more palatable concept.”
MrKrapel continued his statements to Finance Magnates by saying, “Walmart already has a pretty robust financial infrastructure with numerous in-store MoneyGram and Coinstar outlets that are already specifically purposed to ‘banking the unbanked,’” Krapels pointed outside. Walmart also has 2 million-plus employees that could potentially be paid every two weeks, and for the vast majority of America, Walmart is THE place to shop… for everything. Domestic revenue was $332B last year up 50% since the 2008 financial crisis, while international revenues have remained flat for almost a decade at ~ $120B. For mainstreaming bitcoin and its alt brothers, the WalmartCoin seems to me to be a much bigger deal, if it ever moves past the concept stage.”
Russians Using Cryptocurrency for Surveillance
Long before the Chinese Government decided to begin its stablecoin project, the Russian Government created a cryptocurrency project. For the last several years, the Russians have been designing their CryptoRuble to have financial surveillance over their citizens or individuals worldwide. So regardless if Facebook, Walmart or the Chinese Government want to launch a stable coin, there is already an espionage cryptocurrency on the market. Luckily, US Central Banks & Financial Firms have been fighting back. JPMorgan & the Bank of America both are maintaining stablecoins with sophisticated security mechanisms. No trader globally or in the United States of America need to worry about trading stablecoins through these two companies.
There’s considerable speculation that the Russian’s have access to the financial data of more than 5 Million European Union clients currently. This is increasing the nations ability to alter world economies by a small percentage. The Bank of America plans to stabilize the financial economies worldwide with their stablecoin. Furthermore, the Bank of America is working with the United Nations to induct Russia with criminal charges for maintaining an international lawbreaking cryptocurrency. However, the chances of a third-world nation paying the fine are dramatically low. It’s estimated that in the next year the coin will make its official launch after it’s pre-release to selected consumers.
Nicholas Krapels finished his comments with Finance Magnates, speaking about the future of stablecoins by stating: “I doubt there will be one GlobalCoin, as Libra was first called,” he said. “There will be too much competition in that space. I think that if world regulators eventually accept this Corporate Stablecoin concept and there’s no guarantee that it ever will because minting money is one of the sources of power for any government, then we will see these Corporate Stablecoins dominate their industry vertical or their particular region,” he said.
In his comments, Krapels explains the key factors that separate these different coins by saying: “The easy answer is competition should be based on how these products interact with CBDC if any and bitcoin. As with crypto exchanges, the key differentiator often comes down to fiat onramps. If that’s the case, the CSC with more buy-in from their local Government and others wins.”
“If AliCoin operates in a country where it is easy to swap into a CBDC, and then that money can be spent freely on phones everywhere in the country, then it will dominate that country. However, it will not have this built-in advantage when it goes outside of mainland China. That’s where I think the ability to swap into bitcoin will become very important in other countries. Especially those that are a long way from having a CBDC.
Tom Arran
