Stablecoins Are Gaining the Interest of Multinational Corporations; Can they Define the Future of Finance? 

FinanceFeeds Editorial Team

Cryptocurrencies have burgeoned into a trillion-dollar market over the past decade. Today, this ecosystem hosts over 12,000 crypto assets, featuring the likes of Bitcoin, Ethereum and Stablecoins such as Tether (USDT) and Circle’s USDC coin. While all these crypto asset classes have a distinguished value proposition, stablecoins have become popular in recent years given their ability to hedge against volatile market conditions.  

Unlike Bitcoin or Ethereum, stablecoins are pegged to an underlying asset that is less volatile (mostly fiat currencies such as the U.S dollar). They can also be backed by a basket of assets which was the case in Facebook’s Libra proposal. That said, there has been an increasing interest by corporations to launch their own stablecoins. International payments giant PayPal is the latest to join the stablecoin bandwagon, according to a recent report by Bloomberg. 

The discovery was made by a developer called Steve Moser, who noticed references to ‘PayPal Coin’ on the PayPal iOS application. PayPal’s senior vice president of crypto Jose Fernandez da Ponte has since confirmed to Bloomberg that they are exploring the possibilities of debuting a stablecoin, 

“We are exploring a stablecoin, if and when we seek to move forward, we will, of course, work closely with relevant regulators.”

A Pillar of the Future Economy  

So, why are stablecoins becoming the favourite digital asset class for corporations? For starters, they act as the on-ramp to digital markets, enabling participants to convert their funds from fiat and purchase their preferred crypto assets. In addition, stablecoins have proven their potential in facilitating global payments, not to mention internal liquidity use cases such as the JP Morgan coin.  

While USDT and USDC (fiat-backed) stablecoins still dominate the market, decentralized stablecoin ecosystems are gradually challenging their market share. The next section of this article features three stablecoin ecosystems that are changing the DeFi landscape on Cardano, Solana and Bitcoin blockchains, respectively. 

1. Ardana 

Ardana is an on-chain asset-backed stablecoin protocol built on the Cardano blockchain. The project chose this blockchain ecosystem given its scalability based on the Proof-of-Stake (PoS) consensus. At the core, Ardana features an over-collateralized asset-backed stablecoin dubbed Ardana Dollar (dUSD). 

With Ardana, users on the Cardano blockchain don’t have to convert their native assets into fiat to purchase other crypto assets; instead, they can place the ADA into Ardana vaults and receive a proportion of the collateral as freshly minted stablecoins (dUSD). Once they repay the loans, their ADA tokens are released from the vault back to their wallets. 

Besides the decentralized stablecoin, Ardana offers DeFi users on Cardano a DEX stable-asset liquidity pool. This DEX enables a highly capital-efficient trading environment, allowing users to swap stablecoins for other assets while minimizing the risk through liquidity fee incentives. Given the interest in Cardano’s DeFi ecosystem, Ardana is also attracting prominent investors. The project raised $10 million in its latest strategic funding round. 

2. Hubble 

Hubble is a Solana-native project designed to enhance the liquidity within this Layer-1 chain. The project is being rolled out in three phases, with the first one being its stablecoin USDH. Unlike most decentralized stablecoin projects, Hubble incentivizes USDH minting and borrowing. The platform offers users an opportunity to earn a passive yield from their locked collaterals. 

Even better, Hubble’s protocol allows users to collateralize several crypto assets, including BTC, ETH and SOL. In return, they can borrow up to 90.9% of the loan-to-value (LTV) ratio of their collateralized assets. The stablecoin borrows on Hubble are guaranteed by a USDH stability pool that rewards liquidity providers with the platform’s governance token HBB. 

As for the stablecoin loan costs, Hubble charges a one-time 0.5% minting fee. These fees are distributed to the Hubble community in the form of HBB native tokens, enhancing the platform’s decentralized governance approach. Though still in the early stages, Hubble is set to introduce more DeFi-structured products and undercollateralized stablecoins in the upcoming phases. 

3. RSK 

The RSK infrastructure is a smart contract ecosystem secured by the Bitcoin network. This decentralized architecture leverages Bitcoin’s security to introduce a DeFi ecosystem, featuring stablecoins. So far, the RSK platform has a total value locked (TVL) of $133 million, hosting notable stablecoin projects such as MoneyOnChain (MOC), rDAI, xUSD, RIF on Chain and rBRZ. 

With RSK in the picture, Bitcoin die-hards can access the opportunities in DeFi without switching to other blockchain ecosystems. Basically, BTC holders can borrow, lend, trade or earn interest on their holdings. The platform also features enterprise functionality, allowing businesses to access the benefits of blockchain technology while maintaining a secure and immutable network. 

As open finance (OpFi) continues to grow, RSK is one of the platforms that will level up the playing field. More Bitcoin holders are pivoting to this smart contract ecosystem, with the amount of BTC pegged on rootstock increasing from 546 to 2,520 throughout 2021. 

Conclusion 

Thanks to emerging technologies, the financial market has undergone massive changes within the past two decades. Stablecoins, an emerging pillar of the crypto market, will set the stage for more innovations and paradigm shifts. According to the Block data, the total stablecoin supply is currently over $173 billion, a significant increase from $6 billion two years ago. 

Should the supply growth curve follow a similar pattern, this crypto asset class will likely dominate both traditional and nascent markets in the near future. It is no surprise that corporations and government agencies are quickly falling in line. 

Read this next

Digital Assets

OneCoin founder Ruja Ignatova is selling penthouse in UK

OneCoin founder Ruja Ignatova, who steered one of the world’s biggest cryptocurrency frauds, is back into the spotlight more than five years after vanishing from the public eye.

Digital Assets

Bitpay taps MoonPay to offer access to +60 cryptocurrencies

Crypto payment service provider Bitpay said it’s partnering with exchange and web3 infrastructure provider MoonPay to provide its users with easier access to buy cryptocurrency instantly.

Digital Assets

New York investigates Gemini over FDIC insurance claims

New York regulators are investigating Gemini over “false and misleading” claims the Winklevoss-owned exchange had made about whether client funds are insured by the government.

Digital Assets

Binance launches Mastercard-backed crypto card in Brazil

In partnership with Mastercard, crypto giant Binance is launching its pre-paid card offering cryptocurrency “rewards” on customers’ purchases.

Digital Assets

Circle publishes a breakdown of USDC reserves for December

Boston-based stablecoin issuer Circle has revealed a breakdown of its reserves for December 2022, as well as a complete list of USDC reserve custodians.

Retail FX

Monex reports lower revenues as crypto downturn bites

Monex Group has reported its Q3 2022 financial metrics, which saw a reversal in terms of its revenues as TradeStation was grappling with a crypto market crash that has tanked the profitability of its crypto business.

Inside View

Broadridge report finds 27% of firms’ overall IT budget goes to digital transformation

“A new chapter in digital transformation is emerging. In our work with clients across the financial services industry we see leading firms are already reaping the benefits from digitalization and the use of technologies such as AI and blockchain/DLT, as they adapt to economic headwinds and new competitive dynamics”

Executive Moves

Ripple announces Monica Long as President

“I’m incredibly honored to take on the role of President at Ripple as we expand deeper into crypto-enabled services like liquidity, settlement and custody.”

Executive Moves

Arabesque AI appoints Carolina Minio Paluello as CEO

“Arabesque AI is uniquely positioned to service the asset management industry’s need to meet the growing market demand for hyper customised portfolios.”

<