Fiat apocalypse: stablecoin, crypto, CBDCs and China corner money

stablecoins graphics

Fiat apocalypse: stablecoin, crypto, CBDCs and China corner money

2020-03-04 By: ChristopherRay

Stablecoins sneak these days into the daily life of telephone conversations as possible instruments to save savings against hypothetical measures by governments on circulating money. Thus, according to the data, stablecoin could become a safe haven in the face of the effects of the Covid-19 crysis.

The IMF speaks of a contraction in global growth of about four percent and a decline in trade and goods and services of more than eleven percent. Against these figures, the controversial stablecoin Tether has gone from a market capitalization of 4,000 million dollars to 6,200 million during the past month of March. Tether also accompanies and supports a number of powerful DeFi applications and services, underscoring its power worldwide.

However, Tether is not the only stablecoin that is emerging stronger from the crysis. Other options like USDC, TUSD and PAX have improved their numbers and positions in the markets. even at a time when the crypto market in general was on the downside.

G-20 fear

Libra with dollars and cetns

The consolidation of stablecoin underscores the fear shown by the G-20 countries that in stressful situations they become a safe store of value for households, compared to fiat currencies. The G-20 believes that if emerging market households and companies come to hold substantial proportions of their wealth in stablecoin, rather than in local currencies, there will be macro-financial risks.

Situation that is already occurring in Venezuela and Argentina. In both countries, the use of cryptocurrencies and stablecoin has exploded as a consequence of their respective economic crises. For many citizens of these countries, a dollar-based value shelter that is accessible at all times is a great option. The other alternative is to see a lifetime’s savings vanish as a result of currency devaluation and hyperinflation.

Stablecoin’s risks to the financial system were expressed a couple of days ago in a report by the Financial Stability Board (FSB), an international body created by G-20 leaders to oversee the operation of the financial system. In this document, in addition to warning of its risks, it addresses the need for its global regulation.

Bitcoin price increase

A few days ago, Bloqport, one of the reference bulletins for digital investors, alluded in a tweet to the existence of 7,000 billion dollars in stable currencies on exchanges. Which means an increase of 1,500 million in the last month. “A large amount of money on the sidelines, waiting for the right time to return to the cryptocurrency markets and #Bitcoin in the background. There could be strong bullish pressure ahead. ”

The situation described by Bloqport quickly became reality, as the price of bitcoin went from the base of $ 5,000 to $ 7,200. This situation was replicated in the rest of the cryptocurrencies. Although the market is currently on the downside, stablecoins remain strong and green, demonstrating their attractiveness in times of crysis.

It should be remembered that governments around the world became aware of the risks that stablecoins could represent for financial stability after Facebook announced the launch of Libra last June. Since then, stablecoins have not stopped gaining ground in the crypto world, especially among traders, large exchanges, and DeFi platforms.

Tether, value higher than Bitcoin

all stablecoins

Stablecoins currently play an important role in the cryptocurrency markets. For example, at Coinmarketcap, Tether positioned itself with a market volume of over $ 42 billion in the past 24 hours. A value much higher than the volume handled by Bitcoin, located at 33,000 million dollars. Which means that Tether mobilizes 27 percent more value in the markets than Bitcoin. Furthermore, Tether obtains these figures with a market capitalization of just over $ 6 billion.

These data reflect the fundamental role that stablecoins are beginning to play in the internal movements of the cryptocurrency markets. The main cause is how easy it is to mobilize value with Tether, a currency parity to the US dollar. Doing it with BItcoin, whose value fluctuates between the different exchanges at all times, is much more complex. To this we must add that the most far-sighted traders safeguard their earnings and investments in Tether. The objective is none other than to avoid the surprises of the crypto markets.

Given the evidence of these data, there is no doubt that the FSB’s fears are not unfounded. As this body pointed out in October of last year, stablecoins can replace national currencies. However, the FSB is aware of the enormous potential of stablecoins to create economic systems more in line with globalization, questioned by Covid-19.

Battle between crypto, CBDCs and stablecoin

What seems clear, as Sandra Ro, CeO of Global Blockchain Business Council  (GBBC), stated in an interview with this newspaper a month ago, that the serious battle between crypto, CBDCs (central bank digital currencies) and stablecoin has just started. Markets, governments and people will be the ones to decide which currency is the winner, said Ro. But that will only happen when we see them unfold in the real world.

At the moment, these days we are witnessing a scenario in which stablecoin and government currencies begin to take more active positions every day. The experience of the Sand Dollar in the Bahamas, the e-Krona in Sweden or the DC / eP of China indicate the importance of new money in the world economy and finances. Whoever takes positions first will be the most likely to transform the world economy. This is what China does these days.

Hence, the FSB’s timely recommendations, encouraging countries to seek global regulation for stablecoins. It is important to note that a  previous report by the BIS (Bank for International Settlements) highlighted the role of stablecoins to bankise more than two billion people, allowing them access to a decentralized financial system. Providing them with new development opportunities.

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