The financial industry has shown interest in digital coins and blockchain, aiming to utilize tamper-proof digital ledger technology. Recently, US-based investment bank JP Morgan announced that it is launching its own “stablecoin” in order to facilitate the settlements of payments between clients, a move that puts the rest of the industry on notice.
“Stablecoin” is the latest craze in cryptocurrency that utiliizes the blockchain technology, while also pegged to a real-world asset with set prices — such as other currencies, barrels of oil, etc — to help combat the problem of price volatility.
Stablecoins are seen as getting the benefits of both traditional and digital finance: the low volatility of fiat currencies, fast international payments, and availability to anyone with an internet connection.
Multiple crypto initiatives, such as Tether, have emerged in the fast-moving sector. Among the various entrepreneurs, Elizabeth White of New York-based startup The White Company has joined the field to launch stablecoins, with an initial goal to help clients holding cryptocurrency wealth to purchase luxury items.
In a recent email interview with EJ Insight, White explained the phenomenon of “stablecoin” and discussed the hype and truth surrounding the “holy grail of cryptocurrency”.
Excerpts from an interview:
HKEJ: Over the past year, we have seen a proliferation of stablecoins. Why did this happen? And why could they be valuable?
White: Stablecoins have become popular as the focus has shifted from the speculative nature of cryptocurrencies to the incredible advantages of financial transactions leveraging blockchain technology, which are fast, inexpensive and efficient. Since most real-world goods and services are priced in real currencies such as Hong Kong Dollar or US Dollar, it’s necessary to have stablecoins that represent those currencies and avoid the volatility of Bitcoin and other speculative cryptocurrencies.
Q: How does The White Company’s stablecoin solution work? Can they remain stable if Bitcoin, the largest cryptocurrency, keeps crashing?
A: The White Company operates stablecoins denominated in US Dollar (USD), Euros (EUR), and Pound sterling (GBP). What makes these stablecoins unique is that they are 100 percent backed by their represented currency, such that each stablecoin can always be redeemed for its exact value in fiat.
Therefore, the price of Bitcoin or any other crypto does not affect the White Company’s stablecoins in any way. We have built our solution intentionally to be simple, and to avoid using artificial methods of “holding value”, which have been proven to be flawed, as can be seen from the shutdown of stablecoin initiative Basis.
In fact, when Bitcoin crashed, for example in October 2018, we have seen more interest in White Standard stablecoins as traders and investors have realized how useful they are as a cash option they can easily go to and from when trading cryptocurrency.
Q: Amid the growing interest in issuing stablecoins, there are about 120 stablecoin projects underway, according to an industry research report. How would the White Standard stablecoin stand out against similar/competing projects?
A: White Standard is built on the Stellar blockchain, which can handle over 1500 TPS (transactions per second) and can perform 100,000 transactions for less than $0.01. It’s also not vulnerable to slowdowns like we have seen with Ethereum blockchain during ICOs (initial coin offerings).
Also, one defining feature of our stablecoin is it’s available on every Stellar Wallet worldwide and can be used on any exchange that supports XLM, the cryptocurrency built upon the Stellar blockchain platform (of course the exchange has to enable it, but it doesn’t require any new tech implementation). This makes it very easy for anyone to send, receive and use White Standard stablecoins.
Q: According to market research, the stablecoin projects just represent a small fraction of the wider cryptocurrency market. Given the benefits and advantages that the stablecoin initiatives claim, what is preventing them from taking the center stage in the crypto field?
A: The largest stablecoin by market cap is still Tether, and its status and future is very uncertain. Its negative reputation tends to overshadow others. There have also been attempts to make “algorithmic” stablecoins using financial magic which was supposed to make money out of nothing. I think people have focused more on those examples of poorly executed stablecoins than on those like “TrueUSD” (TUSD), or White Standard USD that have been used successfully for nearly a year.
Q: Do you have any plan to expand in Asia’s crypto market?
A: We are in the process of launching a White Standard HKD stablecoin. We also will shortly have the ability for customers to redeem White Standard stablecoin directly into Japanese Yen and Hong Kong Dollar via MasterCard or Visa, or at popular retailers.
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This is the first of a two-part interview with the CEO of The White Company, which is deploying blockchain technology to connect the world of global payments and financial transactions.
Read the second part: Is JPMCoin a cryptocurrency?