Will the New Stable of Stablecoins Help Soothe Nerves, Wean Industry Off Tether?
The Winklevoss twins’ new state regulator-backed stablecoin, the Gemini Dollar, adds to an already healthy lineup of stablecoins–coins pegged to fiat or another store of non-cryptographically secured value. Will stablecoins help wean the crypto markets off the toxic influence of Tether?
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A Stable of Stablecoins Waiting to Be Set Free
The Gemini Dollar, pegged 1:1 with the U.S. dollar, was launched this week. Given the plethora of stablecoins already in the market, most of the excitement was due to its approval by regulators in New York.
Goldman Sachs’ backed Circle announced a stablecoin, USDC, back in May, hoping it would help smooth the interface between fiat and crypto and encourage more widespread use of the former. Only late last month, Terra was launched, with the backing of major exchanges such as Binance, OKEx, and Huobi and a user base of 40 million people.
Kowala’s kUSD, backed by “an elegant combination of math and market forces, software, and self-interest”, is a more cryptographically pure version of a stablecoin. What it lacks in terms of non-crypto asset backing it makes up for with the use of market forces to keep its value steady.
And HybridBlock’s TrueUSD (TUSD) is already listed on major exchanges such as Binance.
Trust in a Trustless System
Few crypto assets boast the genuine trustlessness–for all the wrong reasons–that Tether (USDT) has unleashed on the cryptocurrency community. The controversial coin has long been suspected of not, in fact, enjoying the backing of actual U.S. dollars. Both Tether and Bitfinex were issued subpoenas by the U.S. Commodity Futures Trading Commission earlier this year only weeks after severing ties with their auditors.
Many suspect that Bitfinex and Tether have engaged in a systemic act of fraud that could easily destabilize and undermine crypto markets worldwide. A University of Texas at Austin study found that the release of Tether was largely responsible for bitcoin’s manic bull run of 2017.
Will the New Breed of Stablecoins Help Soothe Nerves?
Are these new breeds of stablecoins ready to provide stability to the market and trust in a trustless system that Tether has undermined? It is doubtless that the reputations of the Winklevoss twins and Goldman Sachs can help ensure trust in their stablecoins. Both have their own issues with repute, but the regulator-pleasing approach they have taken is certain to lend to their coins’ credibility.
Similarly, Terra’s immediate widespread use and acceptance by exchanges and users places it in an equally privileged position. And perhaps one more favorable to cryptocurrency advocates than USDC and the Winklevii Buck.
Those anxious about the impact that any concrete evidence of Tether’s malfeasance would have on crypto markets are likely to feel reassured that Tether’s demise–should it occur–would not necessarily turns the lights off on the crypto party.
But first, a migration from USDT to other stablecoins needs to happen. And that migration needs to be gradual, lest Tether loses value at such a pace as to cause the crypto equivalent of a bank run. On the other hand, the movement needs to be soon enough to preempt a Tether-pocalypse, if that is to happen.
Have your say. Are you hopeful of a gradual weaning off of Tether for less controversial stablecoins?
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