16 Apr What a Crazy Stablecoin Market - Best thing Ever for Oiling the Wheels of Payments During a Transition to Digital Money . . and then it’s Shut Down
The stablecoin market is booming currently as people and businesses move their offline fiat into a digital token that can easily be traded and moved crossborder in an instant. The flight to the dollar from traditional assets like equities and other investments perceived to be risky or currently impacted is fuelling this trend. At a high level there are two kinds of stablecoins, one which is backed 1:1 by a currency (for example USDT, USDC or BUSD) or a basket of assets (Libra), and the other is a decentralized token (like DAI) that is stabilized to keep its “peg” to the value of a currency like the US dollar. Stablecoins are often listed on crypto exchanges which is a convenient place to park funds while moving in or out of crypto investments without cashing them back to fiat in a jurisdiction. This can make funds immediately available for trading, very low cost cross border transacting, and can sometimes prevent triggering of a tax event and liability. In these COVID 19 times of economic uncertainty there is a flight of capital to cash (and particularly USD) to minimise risk and ensure sufficient liquidity, and this combined with the digital convenience of stablecoins has led to a massive influx of capital to stablecoins which are in effect a digital representation of cash. Africa is fertile ground for stablecoins (for eg USD) as a hedge against volatility and inflation of local fiat currencies and for easy cross border remittances. This will become easier with the rollout of mainstream exchanges like Binance and Luno across the continent. The challenge is going to be regulatory approval - the EU has announced that it is going to ban stablecoins. I imagine because they will compete with the government issued digital cash. Click here to contact us for your online payments across Africa Our services include:
