Charles Darwin would have built a killer stablecoin. Stablecoins are competitors to traditional bank accounts

DV_4TzoX0AA2sEMNew forms of money and their adoption will greatly depend on two things: if they can be used as a store of value and if they can be used as a means of payment. Stablecoins have emerged promising both, making significant strides in the past couple of years. Since 2014, a total of 213 stablecoin projects have been announced. Out of all these projects, 59% are still conducting R&D and not yet trading, 29% are live and 11% are dead due to lack of funding, regulatory issues, or fraudulent behavior. Can stablecoins replace existing financial infrastructure, manage currency risk and reduce back-office fees without causing harm? Are stablecoins like Libra solving a problem  or is it just technology for its own sake?

Ilias Louis Hatzis is the Founder at Mercato Blockchain Corporation AG and Weekly Columnist at Daily Fintech.

In September, Coinbase celebrated the one year anniversary of the USD Coin (USDC). During this year, USDC established itself as the second most popular stablecoin and the first to reach $1 billion in issuance in less than a year. A few days after its anniversary, in early October, Coinbase announced rewards for customers that held USDC. Customers that hold USDC will earn 1.25% APY. While the interest is not huge, it is comparable to rates many US banks offer for online savings accounts, for keeping in the bank actual fiat dollars.

Stablecoins have a come a long way, with numbers growing rapidly. According to Blockdata, 66 stablecoins are currently live, with more than half announced in 2018.

Stablecoins have developed into a competitor to traditional bank accounts, representing an $18 trillion market opportunity.


Stablecoins are very attractive as a means of payment, because they solve some very basic and important problems, that existing with today’s payment systems: cost, reach, speed and openness. They offer lower costs to send money anywhere in the world, almost instantly and an open architecture that allows us to embed them, into digital applications. They solve all the things, that closed and proprietary legacy banking systems cannot.

Most importantly, stablecoins promise to make transacting, as easy as using social media. Payments are not just about sending money to each other, but about connecting to other people, just like we do on social networks. Stablecoins integrate into our digital lives, in ways that fiat currency cannot.

Major companies are lured by stablecoins and their potential. Wells Fargo and international banks are planning to issue their own stablecoins. Facebook announced Libra. Walmart is prepping for the Walmart Coin. USDC is available in 85 countries. JP Morgan created a digital asset for settling transactions between institutional clients. Binance announced Venus.

It is no coincidence that Facebook launched Libra. When you consider the company reaches more than 2.8 billion people around the world, it was only a matter of time before it came up with a way that would allow them to transact with each other.

For banks like Wells Fargo, stablecoins represent faster, cheaper and more efficient transactions, compared to SWIFT. Using stablecoins a bank can move money around the clock, from only a few hours a day, five days a week.

Walmart filed for a cryptocurrency patent that follows Facebook’s footsteps. The filing revealed that Walmart wants to pursue a stablecoin pegged to a fiat currency. The company’s goal with the cryptocurrency is to provide accessibility to those that do not access banking services.

Binance Venus could be viewed as even more ambitious than Libra, since the project intends to develop localized stablecoins pegged to regional fiat currencies and work with developing countries to help them create new digital currencies.

While stablecoins are under continuous development,, and have established themselves as a possible future of money, risks exist. Policymakers need to create an environment that maximizes benefits and minimizes risks.

Recently, a G7 report outlined nine “significant risks” posed by stablecoins, from the potential for money laundering to tax compliance. In particular, the report said that company-created digital currencies, such as Facebook’s Libra project, “pose challenges for competition and antitrust policies” and should not be launched until all legal and regulatory risks are addressed. It also said that Libra, because of its global reach, could “undermine competition in financial markets”, as well as threaten financial stability and monetary policy.

The IMF has said that “Stablecoins are a threat to banking and cash”.

I think that stablecoins are an opportunity to create better money. We are still in a Darwinian selection process, with many different flavors, testing new things to figure out what works and what doesn’t.

Charles Darwin would have built a killer stablecoin. He knew that it’s not necessarily the strongest or the first to arrive, who are most likely to survive. It’s the most adaptable who win in the end. Stablecoins are turning money into a profit-motivated competition, and the ones to survive will be those that create the most adaptable verson.

In the short term, fiat-collateralized stablecoins will dominate. They are “cousins” of the fiat money use today. But over time, as DEXs and dApps grow, crypto-collateralized stablecoins will displace the fiat-based stablecoins. In the future, we’re going to have digital wallets that can store our US dollars, Walmart dollars, Facebook dollars, Google dollars and others. All of our favorite brands will have their own color of money.

Brands are realizing that less volatile cryptocurrencies could provide a solid foundation for many of crypto’s benefits and applications. It will be exciting to see how stablecoins disrupt nearly every industry in the decade to come, starting with the banking industry.

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