The bill is currently creating damaging confusion about the true nature of digital currencies. — Simone Mazzuca
The technological developments brought about by the invention of blockchain, bitcoin, and cryptocurrencies are rapidly transforming the financial landscape with the nascent industry failing to fit any conventional classification to become an asset class of its own. Tumultuous as it was in its journey towards the mainstream, the digital currency industry has been beleaguered by wild market fluctuations, fraud, theft, and infested with criminal activities. Despite all these, the sector is proving itself resilient and yet in these unprecedented economic times, showcases new possibilities and technological opportunities. The constant push to expand this industry has been facilitated by the rapid increase of Internet users. The series of lockdowns accompanied by imposed containment policies has led to affected countries having to pin down COVID-19 guidelines which in turn has accelerated the pace of users turning to the Internet for social connectivity, conducting financial operations and seeking for economic capabilities.
Their constant online exposure stimulated their awareness and eventual participation into the workings of the whole cryptocurrency ecosystem, which is becoming a point of preference over the physical fiat, as it presents one dominant factor; providing users control of their financial individuality. Not only has the cryptocurrency ecosystem caught the eye of financial operators, but it has also led to the creation of a new promising form of a digital currency, the stablecoin.
Just when the volatile nature of digital currencies was about to drive potential users, traders, and investors away, stablecoins, were created to address many of the issues surrounding the novel asset class. First, stablecoins remain to be decentralized in nature, functioning without any third party, and under the auspices of blockchain and distributed ledger technology. Second stablecoins significantly reduce crypto volatility by pegging it to the fiat reserve like the USD, EURO, or a basket of assets. Lastly, they empower the user to control ownership over personal wealth, funds and assets, at any time, anywhere. This concept, driven by the knowledge of an obsolete financial system and the flawed foundation upon which the Euro is leaning on, led to Mr Simone Mazzuca creating EURST, which we introduced in our last week’s article ‘EURST Stablecoin — Reinvention of the European Economy’.
But as with any nascent technology, from obscurity came stablecoins as the hottest topic of discussion being brought about by a recent US draft bill proposing that stablecoin operations are to be deemed illegal without prior Federal Reserve approval and licensing, and FDIC insurance. The bill would also require stablecoin issuers to obtain a banking charter, meaning stablecoins become a type of deposit. The principal authors of the draft law, Democrat Representatives, Rashida Tlaib, Jesus Garcia, and Stephen Lynch, contend that the STABLEact is out ‘to protect consumers from the risks posed by emerging payment instruments, such as Facebook’s Libra and other stablecoins offered in the market, by regulating their issuance and related commercial activities’.
In another platform, Cristine Lagarde, the president of the European Central Bank shared her view and is troubled that stablecoins ‘could threaten financial stability and monetary sovereignty’, referring to stablecoins backed by global tech firms.
Contentions against stablecoins are actually what stablecoins are addressingSimone Mazzuca
EURST, for its part, is a live audited stablecoin backed by 1 Euro worth of USD, secured by the Federal Reserve and Wallex Trust, the EURST custodian that employs DLT in its blockchain infrastructure. Users are assured that reserves are readily convertible on demand.
Working on the project of EURST for over a year, Mr Mazzuca made sure that EURST does its job, especially when it comes to securing clients’ assets. This was done by adopting the 5th Anti-Money Laundering Directive and the Know-Your-Client procedures that portray nothing that the STABLEActs authors and the ECB should fear. The unbanked and the underserved will most benefit from EURST since it has practically eliminated costly fees and snail-paced processes that clients would typically experience in the present financial system.
The bill is currently creating damaging confusion about the true nature of digital currenciesSimone Mazzuca
Bitcoin was created to release a currency from its inflationary nature that stablecoins seek to address. Now the technology behind stablecoins has provided many solutions like the issue of double-spending, smart contracts, and the quick and fast processing. When the pegging of stablecoins is the assurance that assets are secured, the fear may be unfounded. One may argue that all stablecoins should be pegged to the USdollar if they could be considered as a substitute for currencies. This would create a whole and united front for the development of stablecoins and eliminate any potential political or economic influence. Suppose the aim of the STABLEAct is to regulate Facebook’s Libra with its fantastic scope of draconian ideals. In that case, the draft law may actually be hurting the ones that are already providing effective niche solutions to the existing financial system.
If stablecoin issuers are not able to acquire the operational structure and licenses EURST achieves, the STABLEAct could diminish technological advancements and blockchain developments, creating more harm than good.
It is, therefore, that Mr Mazzuca believes, the protection we need is for technology to keep on advancing and progressing in order to finally eliminate what has been burdening our people for so long, and that is security and equality in the financial systems.