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Driven by Financial Institutions, Stablecoin Acceptance Turns a Corner

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Major financial institutions love certainty, and that will help the crypto community immensely. Let’s get down to basics: A stablecoin is a type of digital asset designed to solve the problem of the hypervolatility of cryptocurrencies.

This year is an exciting time for stablecoins as interest among financial institutions picks up speed. For example, Wisdomtree, a regulated money manager, has made plans to launch a stablecoin as an extension of its business in exchange-traded funds. IBM, State Street, JPMorgan Chase and Wells Fargo have all been exploring the opportunities provided by stablecoins. None of these institutions are prone to wild speculation. It’s these institutions that will drive mass adoption.

Stablecoins have seen unprecedented growth in the last couple of months, both in terms of demand and utility. Since Feb. 5, the total issued supply has grown by 69.4%,  from $5.68 billion to $9.62 billion, according to the research from The Block. This growth coincides with the global liquidity crunch that started on Feb. 20 due to the COVID-19 pandemic. The panic and instability caused by the pandemic is exposing the weaknesses of both national and international infrastructure, including traditional assets.

As financial institutions in France, China and Russia are either researching or discussing national stablecoins, the international G-7 Working Group on Stablecoins has released a report in partnership with the International Monetary Fund and the Bank for International Settlements investigating the impact of stablecoins. Recognizing some of the current risks and challenges, along with the inherent benefits of stablecoins, it recommends that finance ministries, central banks and standard-setting bodies such as the Committee on Payments and Market Infrastructures work with relevant international organizations to improve the efficiency and inclusiveness of financial services in anticipation of the rising utility of stablecoins.

Similarly, in April of this year, the Financial Stability Board — the coordinating body of the G-20 countries — published a set of recommendations on stablecoins, questioning their relevance as an instrument to protect against speculative fluctuations. Crypto-native financial institutions, such as crypto venture funds, have already implemented stablecoins. Digital financial assets are no longer a fringe idea, and the legacy payments industry is bracing for the mammoth and inevitable disruption brought by stablecoins.

How long will it be before financial institutions outside of crypto get wise to this kind of efficiency?

Advantages of stablecoins

Traditional fiat currencies are full of inefficiencies. Middlemen charge unjustified fees to make slow, inefficient transfers. Unstable economies need a reliable currency, and expatriates need an inexpensive means to send funds back home, among other practical use cases. The digital world hates inefficiency, and solutions are inevitable. Cryptocurrencies are a solution, however with every new technology, there are new problems to solve, and they have suffered from wild and unpredictable swings in value.

A stablecoin has all the advantages of a cryptocurrency: almost instantaneous, inexpensive, borderless, peer-to-peer transfers and available 24 hours per day, seven days per week. But unlike a cryptocurrency, a stablecoin’s value is fixed in relation to a known unit of currency. So, if you send a stablecoin that is worth $10 to a friend, it is almost certainly going to be worth about $10 tomorrow and a month from now. It is therefore not surprising to see that a digital asset that has all of the advantages, and none of the drawbacks, of its competitors would explode in use. For example, the use of the Tether (USDT) — a stablecoin backed by the United States dollar — has spread widely and internationally. More than 9 billion USDT is in circulation for a transaction volume of around $40 billion every 24 hours, according to data from CoinMarketCap at the time of writing.

Yes, the very word “stablecoin” has become a buzzword with the rise of projects such as Libra: a virtual currency developed by Facebook. Libra forced regulatory bodies and public authorities to accelerate their decisionmaking on the subject. With newfound scrutiny came new questions, starting with the usefulness of these tokens and their potential implementation in the traditional currency market.

Stablecoins and financial institutions: New and diversified convergence

Beyond the obvious advantages, stablecoins solve a crucial financial bottleneck in the era of globalization: international monetary transfers. The need for individuals and institutions to transfer funds anywhere in the world, quickly and at low cost, is one that is shared by all players. This triptych of the “mobility, instantaneity and minimal costs” of tokens is now part of the blockchain, a technology that makes these exchanges more efficient, transparent and secure.

Today, a major part of so-called “cross-border” payments — transactions involving individuals, companies or banks operating in at least two different countries — are made by companies to pay their suppliers, subsidiaries or employees. Nevertheless, these transfers are expensive and sometimes outrageous. The fees taken by the giants of the sector specializing in international transfers (remittances) are sometimes between 5% and 10% of each transfer. You might expect that with such high fees, the transfer would at least be convenient for both parties. But in reality, these transfers are painfully slow, sometimes taking up to two working days.

For example, imagine that a global company based in the U.S. seeks to send money to Asia and is quickly confronted with high long-term costs. Its alternatives are limited and most often involve a short-term loan from a bank, customers or suppliers — a solution that is expensive, not very scalable and often risky.

Cut out the middleman. A stablecoin would enable the company to transfer funds quickly, transparently and for practically nothing. The same is true for individuals. Why should someone working for minimum wage have to pay a huge fee just to send money home? Why would anybody pay high fees for a service that is entirely unnecessary? More than ever before, stablecoins appear to be the future of monetary and financial transfers.

Stablecoins and Libra have the potential to grow substantially and shoulder a significant proportion of global transactions. However, JPMorgan estimates that it would take approximately $600 billion of base stablecoin currency to support the flow of $1 trillion in daily transactions without risk of disruption.

Central banks as new bridges between stablecoins and developments in the monetary system

As stablecoins are poised to allow monetary transfers around the globe, a stablecoin issued by a central bank represents the safest monetary value in our system and would replace archaic banknotes. This programmatic dimension makes it practical to automate money remittances securely to millions of people, especially if implemented by governments.

Let’s imagine a simple scenario from just this year. An integration of a stablecoin by the U.S. Federal Reserve would have made the distribution of $1,200 checks to the households hardest hit by the COVID-19 pandemic much faster. Instead, people with no income at all waited sometimes for weeks for physical checks, unable to pay their bills during the pandemic.

The Fed continues to monitor the costs and benefits of issuing a central bank digital currency and has reiterated the notion that some countries may be more suitable than others for a new digital payment service or money. The Fed’s reluctance to take deposits comes down to worries about effects on monetary policy, reducing the role of the commercial banking system and ultimately introducing the potential for systemic stress. As long as the Fed maintains this position, the idea of a CBDC will not take off in the U.S.

But that’s not the situation in Europe.

France is aiming to be a global leader of central-bank-issued digital currencies with a digital euro. Previous concerns coming from both France and Germany, that Facebook’s Libra project posed risks to Europe’s financial sector, have been eased by the development of new regulations to normalize virtual currencies in the eurozone. France has not yet set the details in stone but has invited proposals to explore a CBDC. Up to 10 applications will be funded during this pilot phase. The goals of these tests are to provide a model of a CBDC-based interbank settlement, identify its benefits and analyze its risks. Awards for innovative proposals will be made on July 10. Other countries are testing the waters as well. What is clear from all this government activity is that stablecoins are moving into the mainstream.

The change is already here

Just as the instability caused by COVID-19 has sent traditional assets to the stable U.S. dollar, cryptocurrencies have sought safe haven in stablecoins. The fast pace of digitization is only accelerating and the world will not be the same after this.

Stable corners in the otherwise chaotic digital asset space are a perfect symbol of the revolution that payment systems are facing today. This step marks a major evolution of our monetary system and lays the foundations for a new logic of our financial workings: open, transparent and accessible to all. As an article written by Angela Strange and published by Andreessen Horowitz — one of the world’s most recognized venture capital funds — points out: “Every Company Will Be a Fintech Company.” The change is already here.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

PHugo Renaudin is the CEO of LGO, a digital asset exchange designed for institutional investors. Prior to this, Hugo worked in various roles within the financial industry. This included positions in FX trading, equity derivatives and fund management. His first venture into cryptocurrency began at BitSpread, where he was a portfolio advisor. Hugo holds a Master of Science from Columbia University and a Master of Science from Ecole Polytechnique in France.

Source: https://cointelegraph.com/news/driven-by-financial-institutions-stablecoin-acceptance-turns-a-corner

Blockchain

Billionaire Mike Novogratz Builds Bitcoin Position on Prescience

The sentiment in the crypto community has shifted now that the bulls are back in charge. With the bitcoin price trading within striking distance of $12,000, investors know from experience that this could be just the beginning of another major rally. Billionaire investor Mike Novogratz seems to think so. The Galaxy Digital chief tweeted to […]

The post Billionaire Mike Novogratz Builds Bitcoin Position on Prescience appeared first on BeInCrypto.

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The sentiment in the crypto community has shifted now that the bulls are back in charge. With the bitcoin price trading within striking distance of $12,000, investors know from experience that this could be just the beginning of another major rally.

Billionaire investor Mike Novogratz seems to think so. The Galaxy Digital chief tweeted to BeInCrypto that he added to his bitcoin position on Oct. 19, a decision made on prescience leading into a rally on Oct. 20.

And it’s what he had to say about where the BTC price is headed that could give investors a chance to capitalize on the momentum.

Novogratz expects that once bitcoin takes out $12K, not only does it move higher from there but it will do so quickly. He points to the fundamentals, including “too much demand from new participants,” as the catalyst. Novogratz told BeInCrypto,

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Bitcoin’s Rough Resistance

The $12K level is an important threshold for several reasons. Many consider it tough resistance and the BTC price has not been able to overcome it of late. Recent sessions have seen it remain stuck between the $10,000 and $11,000 area.

Once bitcoin manages to reattain this milestone, the last time of which was August 2020, pundits argue it could be off to the races again.

Bitcoin bull Ivan on Tech, who posts daily videos on YouTube where he has more than 260,000 subscribers, has been giving the play-by-play. He pointed out on Oct. 20 that the bitcoin price actually went straight to $12,000 but got rejected there, which according to him is “all according to plan.”

Once the bitcoin price successfully breaks this level, Ivan on Tech is expecting big things, exclaiming in a tweet,

“Bitcoin will break $20,000 like a massive BOSS.”

The entire crypto community is likely glued to their screens to see if history repeats and the bitcoin price rallies to the moon.

Source: https://beincrypto.com/billionaire-mike-novogratz-builds-bitcoin-position-on-prescience/

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Blockchain

Latvian Financial Watchdog Issues Crypto Fraud Warnings

Latvia’s  Financial and Capital Market Commission (FCMC) has issued a notice to investors to refrain from indulging in malicious digital currency platforms and fake opportunities. The regulator also listed some “signs of fraud” to help individuals identify these deceptive practices. In an official statement published by the FCMC, investors were urged to stay vigilant against […]

The post Latvian Financial Watchdog Issues Crypto Fraud Warnings appeared first on BeInCrypto.

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Latvia’s  Financial and Capital Market Commission (FCMC) has issued a notice to investors to refrain from indulging in malicious digital currency platforms and fake opportunities.

The regulator also listed some “signs of fraud” to help individuals identify these deceptive practices.

In an official statement published by the FCMC, investors were urged to stay vigilant against the growing number of investment opportunities that target individuals across different channels.

According to the FCMC, cryptocurrencies, and associated platforms within Latvia function with a lower degree of regulation when compared to many other financial markets. It claims this makes attacks more prevalent in the country.

The regulators also mentioned that these attacks might be difficult to detect at first because they oftentimes use “the names and images of renowned companies.”

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Uptick in Fraud

Many online advertisements used for fraud purposes lead unsuspecting victims to fancy websites that give them a false sense of security.

The FCMC noted that online fraudsters are constantly on the watch for new ways to extort money from potential victims and that they will often contact investors via email or other popular social media platforms, and even sometimes by phone.

The scammers normally try to mislead investors into buying currencies that don’t exist, refuse withdrawals, or demand that they pay exorbitant amounts for transfers of funds.

The FCMC has welcomed residents to check with the watchdog in order to verify the legitimacy of any platforms or services before actually investing any money. The regulator also listed verified financial service providers on its website.

Source: https://beincrypto.com/latvian-financial-watchdog-issues-crypto-fraud-warnings/

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Blockchain

Upgraded XMR Becomes Best Performer Among Top 15 Coins: Analysis

The upgraded XMR coin becomes the best performer among the top 15 coins by market capitalization as we are reading more in our latest monero news. The privacy-focused cryptocurrency became the best performing coin among the top 15 tokens by market cap after it launched the network update over the past week. The upgraded XMR […]

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The upgraded XMR coin becomes the best performer among the top 15 coins by market capitalization as we are reading more in our latest monero news.

The privacy-focused cryptocurrency became the best performing coin among the top 15 tokens by market cap after it launched the network update over the past week. The upgraded XMR ranked 14th by market cap and trades at $127, increasing by 5% in the day, trimming the weekly losses to less than 4%. At the same time, other major coins from the top 15 which are less than 3% in a day. XMR increased today after a slight reaction to the expected update which was launched on Saturday.

Initially announced in August 2020, Monero’s latest Oxygen Orion update brings some more important improvements to the network at a time when the regulators are getting increasingly worried about the privacy coins. The latest update brings the so-called compact linkable spontaneous anonymous group feature.

coinpaprika
Source coinpaprika.com

As per the Monero blog, the CLSAG update allowed smaller and tighter transactions and will also reduce the transaction size by about 25%. This will also improve the transaction times by 10% and will bolster privacy with Dandelion ++ which is a feature that aims to protect users’ IP addresses. The latest update release comes not too long after another speed and security-centric upgrade named Nitrogen Nebula was launched which was one of the many upgrades that went live in the past few months.

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Right before the release, Monero enjoyed an increase in price and moved up by about 35% in a month and 125% in a year while the US Department of Justice released a new report that explains the risks of end-to-end encryption along with the US Internal Revenue Service which declared war on privacy coins, offering a bounty of about $625,000 to crack Monero’s privacy code.

Monero approaches key resistance, xmr, privacy

Now, Monero scales up to 20 times while compared to the other upgrades, there will be no change to Monero’s mining algorithm was frequently modified to disadvantage the ASIC miners. The project’s upgrade from 2019 included RandomX which means that the network no longer needs changing to its mining algorithm for ASIC resistance. Though not directly related to the upgrade the development of the community project is progressing. The community developers have been working on the atomic swap which allows users to exchange Monero for other coins. The proposal for the project has reached full funding as of late.

DC Forecasts is a leader in many crypto news categories, striving for the highest journalistic standards and abiding by a strict set of editorial policies. If you are interested to offer your expertise or contribute to our news website, feel free to contact us at [email protected]

Source: https://www.dcforecasts.com/monero-news/upgraded-xmr-becomes-best-performer-among-top-15-coins-analysis/

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