Crypto stablecoins be casino chips

n an industry full of jargon, the crypto term stablecoin has perhaps been the most evocative. From large scale global project’s like the Diem Association (née Libra), to the collapse of the Terra-Luna algorithmic stablecoin, which produced an eye watering loss of $60 billion in a matter of days, stablecoins as a category are nonetheless important innovations. Indeed, when Moore’s law, money and an open internet of value begin to connect the dots, there is a profound financial inclusion opportunity that can reduce friction in payments and augur a form of device-centric mobile money that holds the promise of raising global prosperity. The question is whether these innovations will be embraced, heralded and enabled with sound regulation, or will the latest particularly biting “crypto winter,” which has right sized the crypto market, stand in the way?

Many countries have dusted off once-dismissed central bank digital currency (CBDC) ambitions to combat the specter of U.S. big tech dominance of digital currency innovations under the stablecoin moniker. Despite the fact that CBDCs were once viewed unfavorably by central bankers, the summer of 2019 triggered a change of heart and what can be characterized as a digital currency space race. Today, more than 105 central banks representing 95% of the world’s GDP are either studying, prototyping or deploying a CBDC. Each of these experiments, however, pales in comparison to China’s deployment of an E-CNY, which debuted at the Beijing Winter Olympics to a blend of fanfare and fear. Fanfare that the era of central bank retail-level digital currency had arrived. Fear that it could pose a series of complex societal, technological and potentially anti-democratic risks, while dethroning the U.S. dollar as the world’s reserve currency and creating sanctions-resistant payment rails.

Experience suggests that with the future of money and payments, past is prologue. Today, there is a Cambrian explosion of device-centric banking and payments, along with always-on software-powered capital markets, more widely known as decentralized finance (DeFi). A well-regulated, liquid stablecoin that meets the promise in its name, stability, is the essential digital thrift in the crypto assets and blockchain finance market. Despite the volatility with this emerging asset class, the real underlying utility value of payment stablecoins like USDC is often dismissed merely as poker chips in the crypto casino, even though speculative trading has produced one of the most exacting transactional use cases.

Since inception four years ago, USDC has cumulatively processed more than $5 trillion in on-chain transactions. Courtesy of open-source digital wallets and public blockchains, which are the veritable backbone of the internet of value, USDC is available in more than 190 countries, arguably one of the world’s fastest growing and expansive payment networks. Connecting these dots deliberately and across deep public-private partnerships can have profound implications for financial inclusion. Mercifully, the once elusive proof points and real-world impacts of more inclusive forms of digital finance and money are no longer abstractions. Greenshoots of what is possible with a form of borderless money for Thomas Friedman’s hot, flat and crowded world are emerging everywhere.

Tellingly, rather than disrupting traditional banking, monetary policy and development objectives, increasingly well-regulated innovations like USDC are proving to be additive, rather than disruptive to a rules-based global economy. For example, MoneyGram, one of the world’s leading remittance companies, is enabling USDC-denominated remittances using the purpose-built Stellar blockchain for lower cost cross-border payments. Critically, this partnership not only highlights the power of convergence between potentially dueling business models, it also creates a cash-in and cash-out network for USDC, which can accelerate hard currency receipts. Cross-border payments and remittances are the veritable flywheel of the global economy and of the 1.7 billion people around the world who are unbanked, approximately 1 billion of them have access to a low-cost internet connected device. When this device becomes a part of a compliant payment endpoint, progress on poverty alleviation no longer faces technological hindrances, but rather obstacles with policy and incumbents.

Indeed, the well-documented case of using USDC payments for a corruption-resistant instant payment corridor supporting more than 60,000 doctors leading COVID-19 relief efforts in Venezuela speaks to a novel digital humanitarian blueprint. This blueprint should be enshrined as a matter of global development policy, including disaster response and relief efforts, which often underscore the inherent vulnerabilities of low-levels of payment system optionality, as was evident with the economic paralysis that followed COVID-19. The inability to move money reliably, instantly and with high auditability at population scale was clearly a pre-pandemic vulnerability in many so-called fortress nations as well as around the world. These payment networks are undergoing a much-needed systems upgrade courtesy of open blockchain payment infrastructure and payment stablecoins like USDC. One day these networks will approximate Visa-scale transaction throughput and reliability, with settlement finality in seconds at fractional costs compared to legacy money movement systems. The critical piece of the puzzle is that rather than being closed, walled garden payment networks that promote the competitive advantage of single firms or consortia, the era of blockchain-based financial services is extending the perimeter of financial access to once excluded populations. The latest crypto market correction, is eschewing the era of internet hot money and crypto vaporware companies and living behind robust firms committed to more inclusive, well-regulated financial services intermediated on the open internet.

Some of the rules that govern the world need upgrades because they are only exacerbating financial exclusion and creating an insidious drag coefficient on the global economy. For example, if to be banked hinges on access to the brick and mortar banking system, while that system has reached a point of diminishing returns in terms of reach, seems out of touch with technological opportunity. The same holds true to clinging to forms of identity verification and trust that depend on risk-prone authentication, which is especially troublesome for a world with more than 1 billion people born in the shadows with no form of nationally-issued identity—a prerequisite for satisfying antiquated know your customer screening (KYC). Just as the mobile internet has produced exponential gains in access by leapfrogging fixed-line infrastructure, accessing the bottom rung of economic mobility can drive exponential progress with bits and bytes, rather than brick-and-mortar. The countries that embrace this opportunity as a matter of regulatory policy and economic competitiveness will shape the future of the internet of value and prosper along the way.

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