Don’t let China Mint the money of the future!
Here is our pick of the 3 most important Stablecoin news stories during the week.
Is it important to be first, to be second but best or just be the coolest? Clearly China is going to be the first large economy to implement a CBDC. The Western Central Banks believe that there is no need to hurry and the cool kids in DeFi are growing like wild things.
Niall Ferguson wrote an interesting piece this week that covers the full landscape of Digital Currencies from Bitcoin to the Chinese Central Bank Digital Currency (CBDC) and postulates that money does not have to be minted by the State, but if it is then the Chinese are well advanced on what the West has achieved.
The Bank of Japan has been undertaking preparations to begin experiments on a Central Bank Digital Currency (CBDC) in early fiscal year 2021, to test the technical feasibility of the core functions and features required for CBDC. As necessary preparations are now complete, Proof of Concept (PoC) Phase 1 begins today. In PoC Phase 1, the Bank plans to develop a test environment for the CBDC system and conduct experiments on the basic functions that are core to CBDC as a payment instrument such as issuance, distribution, and redemption. This phase will be carried out through March 2022, for a duration of one year.
Meanwhile, those wild kids out in DeFi land are growing and growing. According to decentralized finance (DeFi) ecosystem tracker DeFiLlama, early this morning the DeFi ecosystem breached $100 billion in total value locked (TVL).
Aside from the psychologically significant 9th digit, the figure is notable both for the speed with which it was attained (the ecosystem sat at $20.74 billion total on January 1st, 2021) as well as the sheer quantity of assets the upstart financial vertical now represents.
Per Wikipedia, at $100 billion TVL DeFi is now the equivalent of the 40th largest American bank, sitting between Silicon Valley Bank’s $97 billion in assets and BBVA USA’s $103 billion. Some notable names poised to be left in the dirt in the coming months include Deutsche Bank, sitting at #38 with $119 billion, and Credit Suisse at #35 with $124 billion.
To become the equivalent of the largest American bank, DeFi would have to surpass JP Morgan’s $3.2 trillion, and then the Industrial and Commercial Bank of China’s $4.3 trillion to become the largest in the world.
In summary this week, China is rolling out it’s CBDC, Japan has begun planning for a test cycle and the cool DeFi kids are growing at a staggering rate.
Alan Scott is an expert in the FX market and has been working in the domain of stablecoins for many years.
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