In May, Binance released a report about the state of the stablecoin market. It brings the extent of the current stablecoin boom into sharp relief. In 2019, stablecoins have already overtaken Bitcoin in trading volume. This is driving others to get in on the current trend. For example, Binance itself has announced its intentions to release a stablecoin. In even bigger news, all eyes have been on Facebook since it confirmed it would be launching its own stable version of a cryptocurrency.
With the market for stablecoins suddenly becoming much busier, which are the ones worth watching out for? Here are five contenders worth watching.
It may be the world’s first stablecoin, but USDT could also be a controversial choice, particularly in light of recent events. Tether is owned by the same company as crypto exchange Bitfinex, and last month the two fell into hot water with the New York Attorney General’s office. Tether had previously maintained that it was one hundred percent backed by US dollar reserves, but it recently transpired that around 30% of those reserves had been used to bail Bitfinex out of financial difficulty.
Nevertheless, it doesn’t seem to have caused any lasting damage to Tether. The company is currently minting new USDT, likely in anticipation of further climbs in the price of Bitcoin. Tether may be the first stablecoin, but the way things are going, who knows if it will be the last one standing?
True USD (TUSD)
TrueUSD (TUSD) was the first token to be developed on the TrustToken platform, which has been custom-built for asset-backed tokens. TrustToken sets itself apart from Tether by working with accredited financial trust firms.
These firms have a vested interest in maintaining their clout in the finance sector. In the context of TUSD, they work to ensure that the reserves behind the stablecoin actually exist. TUSD reserves are verified as being held in escrow accounts, and independent audit reports are publicly available online.
TrustToken has also now issued stablecoins backed by other currencies. Users have access to stablecoin versions of Australian and Canadian dollars (TAUD and TCAD) and British pounds (TGBP). Others are expected to follow soon.
While TrustToken may not outstrip Tether in user numbers, it still holds the edge on transparency. Furthermore, branching out to different fiat-backed currencies is likely to make it more appealing to crypto users outside of the US.
Stablecoins backed by assets besides fiat and cryptocurrencies are still a rarity, but perhaps diamDEXX will buck the trend. The company’s DIAM token is backed by real-world diamonds but pegged to the US dollar. Over the long term, it’s possible or even likely that diamonds could prove to be more stable than fiat currency, given the tendency for boom-and-bust economic cycles to repeat themselves.
diamDEXX diamond reserves are fully audited by IDEX, International Diamond Exchange, which is an independent third party. The company is also taking active steps to maintain transparency by observing the Kimberley Protocol. This requires that diamonds are certified as sourced from a region that’s free of conflicts and insurgency.
Furthermore, the project is offering additional features beyond a pure stablecoin. Users can benefit from an integrated wallet, and a merchant platform allowing them to benefit from purchasing diamonds at manufacturer’s prices.
Although stablecoins backed by real-world assets are still a rarity, gemstones and precious metals have stood the test of value over time. If recession hits, stablecoins such as DIAM could provide a much-needed safe haven.
PAXOS Standard (PAX)
Paxos Standard is another stablecoin that followed on the tails of Tether, but with a vision of overcoming the trust problems of the latter. The Paxos Trust Company is a blockchain startup, but it obtained the much-coveted New York Bitlicense for operating a fiat-backed stablecoin. Given that Paxos partners with financial institutions, the token is probably the closest thing to a regulated stablecoin that currently exists.
PAX saw a peak after the Tether scandal emerged in May, minting $10 million new tokens overnight in response to the surge in demand for an alternative.
Although this is promising news for PAX, it still ranks below other stablecoins such as USDT and TUSD. However, its regulated status makes it an ideal choice for institutional investors. Unless and until cryptocurrencies become subject to more general and stringent regulations, it may be that PAXOS becomes the stablecoin of choice for institutional investors.
Facebook, the world’s biggest social network with nearly 2.4 billion users, which gives its own stablecoin unprecedented potential to disrupt the crypto markets.
Dubbed “Libra,” the Facebook cryptocurrency has confirmed over 28 partners to the Libra Association, the Swiss-based consortia that will operate the Libra blockchain. However, big tech peers such as Google, Amazon, and Apple have not yet confirmed.
It’s still to be revealed whether or not there will be any incentives or other alluring features for users. It’s also proving to be extremely controversial. This was to be expected in the crypto community, but even beyond, US government representatives are expressing caution. Given Facebook’s tendency to openly share information with anyone who wants to see it, it’s almost inevitable that the regulators will intervene. Perhaps Libra will become the world’s biggest cryptocurrency. Or maybe it will be dead in the water even before it even starts swimming.
It’s becoming inevitable that stablecoins will soon occupy a more predominant role in our lives, ultimately becoming a part of our daily financial routines. The question is: which of them will achieve this? Will one coin reign supreme? Or perhaps we’ll see a split between institutions, crypto purists and the Facebook coin users. One thing’s for sure – right now, stablecoins are the ones to watch.