• Follow us

Economy

Explainer: 'Stablecoins' in the spotlight as Facebook unveils Libra...

LONDON (Reuters) - Is bitcoin’s crown slipping?

FILE PHOTO: A Bitcoin logo is seen on a cryptocurrency ATM in Santa Monica, California, U.S., January 4, 2018. REUTERS/Lucy Nicholson/File Photo

The original cryptocurrency accounts for over half of the $285 billion global coin trading market. But that dominance is under threat, with a host of alternative digital coins emerging as developers race to build cryptocurrencies able to enter mainstream commerce and finance.

As these “altcoins” gain prominence, Reuters is publishing a series of stories that looks at the major alternatives to bitcoin as they muscle their way onto the radar of developers, investors and regulators.

Facebook Inc revealed plans on Tuesday to launch a cryptocurrency called Libra, the latest development in its effort to expand beyond social networking and move into e-commerce and global payments.

Like a variety of altcoins known as “stablecoins,” Libra will be backed by a reserve of real-world assets, including bank deposits and short-term government securities. This should make it more stable than other cryptocurrencies.

Here are three key questions about stablecoins.

WHAT’S THE BIG IDEA?

Stablecoins are designed to overcome the wild price swings that have rendered bitcoin and other cryptocurrencies impractical both for commerce and payments and as a store of value.

In theory, stablecoins should then be more useful for paying for goods and services or transferring money across borders. Most are backed on a one-to-one basis by mainstream assets like the U.S. dollar, while others are collateralized by baskets of cryptocurrencies. Some use algorithms to maintain stable values.

Proponents say stablecoins could help cryptocurrencies gain mainstream appeal.

By overcoming bitcoin’s perennial headache of high volatility, the argument goes, stablecoins could pave the way for the adoption of a wider suite of blockchain- and cryptocurrency-based financial products that aren’t currently practical.

“People talk about doing crop insurance on the blockchain - but they can’t do that with an asset that moves 10%, day by day,” said Peter Smith, CEO of Blockchain, a London-based cryptocurrency exchange and one of the original providers of digital wallets. “It just doesn’t work.”

WHO ARE THE MAJOR INCUMBENTS?

Tether, the highest-profile stablecoin, is the ninth-biggest cryptocurrency by market capitalization, with coins worth around $3.5 billion in existence. That’s a fraction of bitcoin’s $163 billion market cap.

Tether has faced by questions over whether it holds the U.S. dollars to back the tokens in circulation. Tether has said it has sufficient reserves, though it added in March that its tokens were backed by both currency and “cash equivalents”.

USD Coin, run by the Goldman Sachs-backed startup Circle and the San Francisco-based Coinbase exchange, has a circulation worth around $343 million. Others, including the Paxos Standard and the Gemini Dollar, are much smaller.

But in contrast to Facebook’s cryptocurrency, these stablecoins are all issued by “crypto-native” firms whose roots are in the nascent sector. They have therefore faced an uphill struggle for wider acceptance in the real economy.

ARE STABLECOINS USED DIFFERENTLY TO BITCOIN?

It’s hard to gauge exactly how cryptocurrencies are used, given their near-anonymity. But researchers say stablecoins, like bitcoin, are seldom used for payments, even if their lack of volatility should make them more useful.

Other cryptocurrency traders and exchange operators said investors use stablecoins to hedge against spikes in bitcoin’s price, and as a means to trade cryptocurrencies without using dollars.

Combined trading volumes at major exchanges of five of the biggest stablecoins, including Tether and USD Coin, have spiked in recent months. According to data from U.S. researcher Coin Metrics, volumes rose to $74 billion in May, a more than four fold increase from December.

“If they feel bitcoin is going to go up or down, they prefer to cash out to a stablecoin - it allows them to trade quicker, and get back into the market,” said Thomas Puech of Enigma Securities, a London-based cryptocurrency exchange.

Slideshow (2 Images)

Other traders see in stablecoins opportunities for arbitrage between the myriad exchanges across the globe, said Michel Rauchs, cryptocurrency and blockchain lead at the University of Cambridge’s Centre for Alternative Finance.

“Now you have a way to essentially transfer your dollars in and out of exchanges pretty much instantly, which of course makes it a lot easier to do arbitrage,” he said.

Tether is also popular among investors in mainland China looking to get around tight capital controls and move money offshore as the Chinese economy slows, said Bill Xing of New York-based cryptocurrency index firm Panda Analytics.

Reporting by Tom Wilson; editing by Anna Willard

Our Standards:The Thomson Reuters Trust Principles.Read More



Leave A Comment

More News

BBC News - Business

'Pilots were not to blame for 737 crash' 2019-06-16 19:25:00The boss of Ethiopian Airlines has rejected the idea his pilots were at fault in 737 Max crash.

Brexit uncertainty 'hitting UK business investment' 2019-06-16 19:16:38Companies should be investing in measures aimed at growth, says the British Chambers of Commerce.

CEO Secrets: My clubs aren't 'pale, stale and 2019-06-16 19:06:43Entrepreneur Ronald Ndoro talks about his vision for private members' clubs in the 21st century.

Carole Ghosn: 'I'm a housewife, not a conniving 2019-06-16 19:02:06The wife of former Nissan chief Carlos Ghosn speaks out about his detention and campaign to free him.

Carole Ghosn calls for President Trump to back 2019-06-16 19:00:19The wife of the former Nissan boss Carlos Ghosn wants pressure put on Japan over his legal battle.

Argentina and Uruguay scramble to restore power after 2019-06-16 15:40:42Argentina's president promises a full investigation after a blackout left millions without electricity.

Tory leadership race: EU will renegotiate Brexit package, 2019-06-16 09:26:49Mr Hunt said if there is no prospect of a deal by 31 October he would accept a no-deal Brexit.

Babe Ruth jersey fetches record-breaking $5.64m at auction 2019-06-15 20:56:37The baseball legend's jersey becomes the most expensive piece of sports memorabilia ever sold.

Tattoos at work: Are they still an issue? 2019-06-15 19:58:56Employers have become more relaxed about visible tattoos at work, but some firms still don't allow them.

Illegal eel exporters exposed by Countryfile 2019-06-15 19:23:26International buyers offered high prices for eels caught on the River Severn in Gloucestershire.

'My parents wanted me to marry. I became 2019-06-15 19:10:43Photographer Sayan Hazra captures a day in the life of one of India's few female DJs.

India announces retaliatory trade tariffs against the US 2019-06-15 17:13:07The new duties come days before countries' leaders are expected to meet at a G20 summit in Japan.

Reuters: Business News

AT&T drops CBS channels from its cable systems 2019-07-20 04:21:13CBS Corp said on Saturday AT&T Inc has removed CBS's television stations from the channels of DIRECTV, DIRECTV NOW and AT&T U-verse TV cust

Carlos Ghosn sues Nissan-Mitsubishi in the Netherlands: paper 2019-07-20 04:10:35Carlos Ghosn has launched a court case in the Netherlands against Japanese carmakers Nissan Motor and Mitsubishi Motors , who ousted him as chairman

China Southern Airlines to receive $4 billion capital 2019-07-20 01:55:40China Southern Airlines will carry out an equity diversification plan that will involve the injection of 30 billion yuan ($4.36 billion) of capital f

American Airlines-Qantas joint venture wins final U.S. approval 2019-07-19 21:38:57The U.S. Department of Transportation (DOT) on Friday granted American Airlines Group Inc and Qantas Airways Ltd final approval to operate a joint ven

White House to host meeting with tech executives 2019-07-19 20:50:04White House economic adviser Larry Kudlow will host a meeting with semiconductor and software executives on Monday to discuss the U.S. ban on sales to

Equifax nears deal to pay about $700 million 2019-07-19 20:02:51Credit reporting company Equifax Inc is close to a deal to pay around $700 million to settle data breach probes with U.S. regulators and states, the

Ford to lay off around 200 workers at 2019-07-19 18:16:47Ford Motor Co will lay off about approximately 200 employees in September at a Canadian manufacturing plant in Oakville, Ontario, with the possibilit

Four Republican lawmakers ask Trump to move forward 2019-07-19 17:44:08Four Republican members of U.S. Congress, including House Armed Services Committee ranking member Mac Thornberry, sent a letter to President Donald Tr

Wall Street falls as Fed signals smaller rate 2019-07-19 17:34:24Wall Street's main indexes fell on Friday following a report that the Federal Reserve plans to cut interest rates by only a quarter-percentage point

Oil climbs as Middle East tensions offset demand 2019-07-19 16:55:01Oil prices rose about 1 percent on Friday after steep losses a day earlier, supported by rising tensions between the United States and Iran, even as c

Global stocks down as big rate cut hopes 2019-07-19 16:45:47A gauge of global stocks declined after early gains dissipated on Friday as expectations for a strongly dovish U.S. Federal Reserve at its next meetin

Trump: U.S. had 'very good talk' with China; 2019-07-19 16:38:26U.S. President Donald Trump said on Friday that U.S. Treasury Secretary Steve Mnuchin had a very good talk with his Chinese counterpart, amid signals

Business News - UPI.com

Pentagon: 2,100 more troops headed to U.S.-Mexico border 2019-07-18 12:07:42 An additional 2,100 troops, including 1,100 active-duty service members and 1,000 Texas National Guard soldiers, will be deployed to the U.S.-Mexico

Air Force pilot tests modified Black Hawk helicopter 2019-07-18 09:58:06 For the first time, an Air Force pilot tested an HH-60W combat rescue helicopter, which is a modified version of the Army's UH-60M Black Hawk.

Six companies to compete for $2.5B in funds 2019-07-18 09:10:08 The Navy awarded six companies task orders for a potential 10-year, $2.5 billion contract to install and support command, control, communications, co

Navy seeks proposals for unmanned surface vessel 2019-07-17 15:17:31 A U.S. Navy request for proposals calls for a new class of unmanned surface vessels.

Hospital ship USNS Comfort leaves Peru after treating 2019-07-17 15:07:43 The Navy hospital ship USNS Comfort left Peru on Wednesday, its second stop in Central America serving refugees from Venezuela.

Raytheon nets $40.2M for variants of Navy's AN/SPY-6 2019-07-17 13:41:15 Raytheon Co. was awarded a $40.2 million contract for long lead material for production on two variants of the U.S. Navy's AN/SPY-6 radar system, on

U.S. Air Force calls for proposals to replace 2019-07-17 13:21:35 The U.S. Air Force announced an RFP aimed at Boeing and Northrop Grumman for the Ground Based Strategic Deterrent, a new intercontinental ballistic m

U.S. Marines' new Mk13 Mod 7 rifle is 2019-07-17 12:11:44 An improved U.S. Marine Corps precision-firing rifle is now fully operational, the Marine Corps Systems Command announced.

Lockheed awarded $492.1M for HIMARS systems for U.S., 2019-07-16 11:36:52 Lockheed Martin was awarded a $492.1 million contract for High Mobility Artillery Rocket Systems M142 launchers and associated hardware for the U.S.

Britain's first P-8A Poseidon takes flight near Boeing 2019-07-16 09:43:14 The first of Britain's nine P-8A Poseidon patrol aircraft took off in an inaugural flight by Boeing test pilots from Renton, Wash.

BAE Systems wins $45M contract for howitzer modifications 2019-07-15 15:25:05 BAE Systems received a $45 million contract to improve the firing capabilities of the howitzers of the U.S. Army, the company announced Monday.

Raytheon nabs $110M contract for cybersecurity for Middle 2019-07-15 14:39:35 Raytheon Co. announced a $110 million contract on Monday to develop and deploy cybersecurity equipment for an unnamed country in the Middle East Nort

Christian Science Monitor |

Stock markets fall after US-China trade talk stalemate 2019-06-10 09:31:25Economists warn that U.S. and China’s escalating dispute over trade and technology will likely hurt economic growth. 

This Nebraska Republican says it’s time to think 2019-06-10 09:31:25President Trump is meeting with Democrats on infrastructure. Rural America says that, from roads to internet access, it needs to be part of any plan.

A doubly green deal? Clean energy jobs also 2019-06-10 09:31:25New analysis from the Brookings Institution suggests that transitioning to clean energy sources could open up a range of high-paying career paths.

One group not happy about older workers: young 2019-06-10 09:31:24Americans under 50 believe the rising number of older workers hurts the economy, a recent poll shows. Longer and healthier life spans have allowed mor

Robot baristas in South Korea push automation forward 2019-06-10 09:31:24South Korea's coffee scene has a new face: robotic baristas. While automation raises concerns that finding entry-level jobs will become har

SEC moves to require brokers to reveal conflicts 2019-06-10 09:31:24In the past, not all financial advisers were legally required to put clients' interest first. But some say the new measure by federal regulators does

Medicare for all – why supporters can’t agree 2019-06-10 09:31:24Support for single-payer health care seems to have risen over the past year or so, but such a plan presents complex, and controversial, choices.

Where is workforce really booming? Among the oldest 2019-06-10 09:31:24McDonald’s wants to hire 250,000 senior workers. A CVS program avows that ‘Talent is Ageless.’ And nationwide the ranks of older wor

Car trouble: How symbol of freedom became a 2019-06-10 09:31:24A record 7 million Americans are 90 days or more delinquent on car loans, a new report finds. U.S. auto debt is also at a record: $1.28 tril

Uber’s founders have cashed in. How about the 2019-06-10 09:31:24Uber relies on an army of drivers whom it refuses to call employees. But some see its “Partner Protection” plan as a model for the gig eco

As US-China trade war ramps up, how will 2019-06-10 09:31:24China-made goods will cost Americans more, as President Trump presses Beijing for trade-talk concessions. By July tariffs may hit cellphones, shoes.

Walmart follows Target to enter retail shipping wars 2019-06-10 09:31:24The nation's largest retailer joins the next-day shipping competition. Walmart has one big advantage over Amazon – its more than 4,700 sto

Home Page

HDFC Bank reports 18.04% jump in Q1 consolidated 2019-07-20 10:22:32During the quarter, gross non-performing assets (NPAs) rose to Rs 11,768.95 crore which is 1.40 per cent of the total advances

IndiGo to seek shareholders' approval for board expansion 2019-07-20 10:14:32The board's size will be expanded to 12 directors from the current six once the shareholders' approval is obtained

Sheila Dikshit, the stalwart who breathed elegance into 2019-07-20 09:00:53Not a born politician, she entered after her husband's demise, helping her father-in-law, learning the ropes in smoke-filled rooms and coming into co

Jet's resolution professional invites expressions of interest by 2019-07-20 08:23:42The airline's assets include 14 aircraft including 10 Boeing planes -- down from 124 before the grounding -- and 49 per cent stake in Jet Privilege a

India Ratings defends process after IL&FS row, says 2019-07-20 07:19:21It rejected the observations made in a special audit by Grant Thornton of the ratings given by five credit rating agencies, including India Ratings, t

India buying S-400 from Russia is a 'problem' 2019-07-20 06:24:05India inked an agreement with Russia last October to procure a batch of the S-400 missile systems at a cost of Rs 40,000 crore

Raghuram Rajan signals Brexit politics deterred him from 2019-07-20 05:56:41The government is seeking a successor to Mark Carney, who will step down in January

Several states get new Governors, Anandiben Patel transferred 2019-07-20 04:36:20Phagu Chauhan will fill replace Lal Ji Tandon as Bihar governor

China urges India to join war against protectionism 2019-07-20 03:56:22India for long has been pressing China to open its pharmaceutical market for Indian pharma exports to address the yawning trade deficit

Mukesh Ambani caps his annual salary at Rs 2019-07-20 02:34:14Ambani has kept salary, perquisites, allowances and commission together at Rs 15 crore since 2008-09, forgoing over Rs 24 crore per annum

Apollo 11 turns 50: Moon exploration, interesting facts 2019-07-20 00:27:54NASA's Project Artemis aims to take more humans, including the first woman ever to the moon

'Just a window dressing': US doubts Pak's intention 2019-07-20 00:20:54Saeed, a UN-designated terrorist was arrested on Wednesday -- the seventh times since December 2001


Disclaimer and Notice:WorldProNews.com is not responsible of these news or any information published on this website.