The Libra’s announcement accelerated the plans of the People’s Bank of China to have a sovereign national currency on the blockchain, and this had sparked the debate about this movement. After all, will other central banks issue sovereign stablecoins? Also, does issuing a national currency on a blockchain bring any advantage for citizens?
For Transfero’s CEO, Thiago Cesar, in general, there would be no difference in central banks issuing stablecoins or traditional money. That means, the State would continue to be the issuer, could freely issue the currency and it would not be auditable. “A national cryptocurrency would continue to follow political and economic guidelines”, he says.
Foxbit CEO, João Canhada, goes along the same line. He thinks that the issuing of the currency should be separated from the State just as the Church was separated from the State some centuries ago. Still, Canhada considers that the PBoC movement will provoke other central banks to do the same.
Private stablecoins have different purposes from other cryptocurrencies
In this scenario lies the role of private stablecoins. For Cesar, they are not an evolution, but yet cryptocurrencies created for different purposes. “For instance, the tether dollar arose to respond the exchanges’ needs, as they were not able to have bank accounts and, therefore, it was as an alternative instrument that coud represent the dollar”, the executive explained.
“For instance, the tether dollar arose to respond the exchanges’ needs, as they were not able to have bank accounts and, therefore, it was as an alternative instrument that coud represent the dollar”,
Transfero was a pioneer in Brazil when issuing the BRZ, the first Brazilian stablecoin pegged to the Real. With it, a trader manages, for example, to invest in bitcoin or other pairs of cryptocurrencies and, when necessary, cease to expose himself to the volatility of these assets.
Unlike a sovereign token, private stablecoins are auditable and inserted into a competitive market. That is, they need to have confidence and credibility in order to survive. But still, as they are issued by a single entity, they may suffer interference from the regulator of the jurisdiction in which they are issued. Therefore, it is important to choose stablecoins issued in crypto-friendly jurisdictions, such as the Bahamas.
The fact is that stablecoins are based on trust. “What you will trust more, an entity that says you have a certain digital money or a token on an immutable and fully auditable blockchain”, says Reinaldo Rabelo, Director of New Business at Mercado do Bitcoin.
Stablecoins are not a good option for international remmittances
There are also those who consider the stablecoins as international remittances instruments. This, however, is a sensitive topic. Because the problem of making international remittances lies on local regulations. For example, in Switzerland it is not necessary to have a stablecoin to do such an operation. On the other hand, in countries with strong regulation, even remittances in stablecoins would be restricted.
The three executives participated on Tuesday (29/10) in a debate on stablecoins in Future Payment, vertical event of FutureCom 2019, held between 28 and 31/10 in São Paulo (SP).