Stablecoins are for payments, not just as a value store between trades.
Here is our pick of the 3 most important Stablecoin news stories during the week.
This week we saw an interesting illustration of the difference between private issuers of stablecoins (Tether and Circle being the largest) and those public who are likely issuers being the Central Banks. The real money and opportunity is in the services around the currency and not the issuance itself.
Circle is going public (as in public equity markets), which will help with transparency as they scale. Beyond the headline USD 4.5 billion valuation (on estimated revenue in 2023 of $778m or 5.8x), what is clear is it’s positioning as a payments company in competition to Visa, paypal etc rather than just a manufacturer of smarter and Digital USD equivalents.
According to an investor presentation released with Thursday’s announcement, Circle estimates it will generate $115 million in revenue in 2021 with a $76 million loss. Of those revenues, it expects $40 million to come from USDC, $65 million to come from TTS and $10 million from SeedInvest. TTS (Transaction and Treasury Services) are probably the least understood and least detailed part of its offerings, described as “Circle Accounts and API services provide companies with a comprehensive suite of payments and treasury services,” the investor presentation says.
The company also projects $76 million in earnings before interest, taxes, depreciation and amortization (EBITDA) by 2023. off that, it expects TTS to be by far the largest line of business.
In the meantime the BIS (the Central Bankers Bank or Bank of International Settlements) released a report saying cross border payments as a use case needed more focus from Central Banks. Central bank digital currencies (CBDCs) have the potential to enhance the efficiency of cross-border payments, as long as countries work together. This is the main conclusion of a joint report released today by the Committee on Payments and Market Infrastructures, the BIS Innovation Hub, the International Monetary Fund (IMF) and the World Bank. The concern seems to be that they are being sidetracked into political/social issues/opportunities via a retail CBDC and missing one of their core businesses.
Which brings us back to what is the real and best use case for CBDC. CBDC’s could be as far as 10 years away and have yet to face some really tough choices which will require Public debate on everything from privacy to cross-border competition as critical citizens have their say, as this article from the FT highlights.
So in summary, Private sector players in the stablecoin business are building war chests, scaling, innovating and becoming more transparent while Central Banks are very much still in the early design stages.
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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