Is this time a case of last mover advantage?
Here is our pick of the 3 most important Stablecoin news stories during the week.
Normally in the Fintech world a large advantage goes to the first mover, they get to build brand and scale, while the others scramble. Then that brand and scale has its own rewards in network effects or monetization that builds a defensive moat that the others now have to deal with. Think Facebook, Uber, NetFlix, Google and Amazon.
But what if those rules don’t apply in the stablecoin space. The US Dollar or Euro don’t need to build a brand, they already have it. As for scale, they have plenty of that too.
However, the downside of technical or more likely a function failure are really quite large. By function failure, I mean privacy or data breaches, that seem sound at the outset but the law of unintended consequences steps in and some poor citizen pops up on our front pages because their money has been confiscated or some other calamity that in hindsight looks like the State overreached (to put it kindly).
The Chinese are clearly solving any technical issues as their pilot is well advanced. This FT article raises some interesting questions “In a CBDC world — especially a Chinese CBDC world — there are no such privacy or exclusion guarantees. A user can be frozen out of the system entirely, left to starve because they can’t access payments for food, at the whim of a warrantless government directive.”
In the meantime, the ECB has stepped up it’s “go slow but look like you’re doing something” strategy by asking for, wait for it…. Your opinion!
They have even gone to the expense and trouble of a web page that you can go to here. Your views on a digital euro
While those “can do” Aussies have rolled up their sleeves and announced an interesting consortium to tackle what I think is the best use case for a Central Bank stablecoin, which is on the wholesale side and not the retail.
The Australian central bank announced Monday it’s partnering with Commonwealth Bank, National Australia Bank, Perpetual (a large wealth manager) and ConsenSys (presumably to provide the technology and expertise) to explore the possible use and implications of a wholesale form of central bank digital currency (CBDC) using distributed ledger technology (DLT).
So in this week, we saw the Chinese crack on with a Retail CBDC trail that at a technical level at least appears to be working well, in Europe, we had the ECB ask us what our ideas and thoughts are, while the Australians are focusing on the wholesale side where everyone can play their familiar roles. The Central Bank the supervisor and Regulator, the commercial Banks as service providers and the large wealth manager as a customer. At least in this case we have a well proven set of rules, expectations and ultimately dispute resolution process that should keep those unintended consequences at bay.
Alan Scott is an expert in the FX market and has been working in the domain of stablecoins for many years.
We have a self imposed constraint of 3 news stories per week because we serve busy senior Fintech leaders who just want succinct and important information.
New readers can read 3 free articles. To become a member with full access to all that Daily Fintech offers, the cost is just US$143 a year (= $0.39 per day or $2.75 per week). For less than one cup of coffee you get a week full of caffeine for the mind.