Are Stablecoins superior to TradFi?
Here is our pick of the 3 most important Stablecoin news stories during the week.
An important question was answered this week. Are we really taking a step forward in terms of value with this new technology over the current Financial Infrastructure often referred to as TradFI?
First a reminder of how regulators would find that the DLT technology is superior to the current financial system, it leaves a very good audit trail of who did what. The United States Attorney’s office recently filed a civil complaint accusing four digital wallets containing more than 9.8 million Tether (USDT) of being involved in wire fraud, computer fraud, and money laundering
U.S Government sues for millions of USDT purportedly stolen – Nairametrics
Now onto interoperability, in the really new world of DeFi, Solana users can swap wrapped stablecoins via a Mercurial Finance liquidity pool. Mercurial Finance has launched a liquidity pool for Wormhole wrapped stablecoin assets, the decentralized exchange announced Friday.
- Mercurial Finance is conceptually similar to Ethereum-native Curve Finance, a decentralized exchange optimized for swapping like-assets such as two different stablecoins. Mercurial is backed by the DeFi Alliance incubator.
- Wormhole has been expanding aggressively to new asset types, and with new functionalities. Earlier in the month, Wormhole v2 launched to provide a bi-directional bridge for a variety of tokens, including non-fungible tokens (NFTs).
- In a tweet today, Mercurial Finance wrote that the pools will help ensure the end-to-end decentralization of stablecoin assets on Solana.
- A press release from Mercurial said that users who provided liquidity to the USDC-wUSDC-wUSDT-wDAI cross-chain pool could earn up to 159.5% APY. The yield currently sits at 33%.
- Jump Crypto is a lead contributor to Wormhole, and the firm has also backed and helped to develop the Solana-native oracle service Pyth.
Bridged Stablecoins on Solana Get a Boost With Mercurial Finance Pools — CoinDesk
And Finally, validation from the Central Bankers, Banker (BIS or Bank of International Settlements) that stablecoins can dramatically cut the costs of cross border payments.
According to the report titled “Inthanon-LionRock to mBridge: Building a multi CBDC platform for international payments” published on Tuesday, CBDCs can reduce the transaction throughput of cross-border payments from three to five business days to only a few seconds.
Inthanon-LionRock to mBridge: Building a multi CBDC platform for international payments (bis.org)
“A prototype of multiple Central Bank Digital Currencies (mCBDCs) developed by the Bank for International Settlements Innovation Hub and four central banks demonstrated the potential of using digital currencies and distributed ledger technology (DLT) for delivering real-time, cheaper and safer cross-border payments and settlements.
The mBridge project is a cooperation between the BIS Innovation Hub Hong Kong Centre, the Hong Kong Monetary Authority; the Bank of Thailand; the Digital Currency Institute of the People’s Bank of China; and the Central Bank of the United Arab Emirates.
The common prototype platform for mCBDC settlements was able to complete international transfers and foreign exchange operations in seconds, as opposed to the several days normally required for any transaction to be completed using the existing network of commercial banks and operate in a 24/7 basis. The cost of such operations to users can also be reduced by up to half, according to this report.”
CBDCs can cut cross border remittance costs by half: BIS report (cointelegraph.com)
So in summary, this week we had more confirmation that this new stablecoin technology is faster, better and cheaper than TradFI.
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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.
For context on stablecoins please read this introductory interview with Alan “How stablecoins will change our world” and read articles tagged stablecoin in our archives.
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