{"id":412777,"date":"2022-03-06T20:03:00","date_gmt":"2022-03-06T17:03:00","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/stablecoins-will-have-to-reflect-and-evolve-to-live-up-to-their-name\/"},"modified":"2022-03-06T20:03:00","modified_gmt":"2022-03-06T17:03:00","slug":"stablecoins-will-have-to-reflect-and-evolve-to-live-up-to-their-name","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/stablecoins-will-have-to-reflect-and-evolve-to-live-up-to-their-name\/","title":{"rendered":"# Stablecoins will have to reflect and evolve to live up to their name"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a3aa8000dada\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a3aa8000dada\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/stablecoins-will-have-to-reflect-and-evolve-to-live-up-to-their-name\/#%E2%80%9D_Stablecoins_will_have_to_reflect_and_evolve_to_live_up_to_their_name_%E2%80%9C\" >&#8221; Stablecoins will have to reflect and evolve to live up to their name &#8220;<\/a><ul class='ez-toc-list-level-2' ><li class='ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/stablecoins-will-have-to-reflect-and-evolve-to-live-up-to-their-name\/#Where_did_all_the_stability_go\" >Where did all the stability go?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/buradabiliyorum.com\/en\/stablecoins-will-have-to-reflect-and-evolve-to-live-up-to-their-name\/#A_solution_worth_its_weight_in_gold\" >A solution worth its weight in gold<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/buradabiliyorum.com\/en\/stablecoins-will-have-to-reflect-and-evolve-to-live-up-to-their-name\/#Renewed_calls_for_regulatory_oversight\" >Renewed calls for regulatory oversight<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/buradabiliyorum.com\/en\/stablecoins-will-have-to-reflect-and-evolve-to-live-up-to-their-name\/#A_way_out_of_the_inflation_crisis\" >A way out of the inflation crisis<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h1><span class=\"ez-toc-section\" id=\"%E2%80%9D_Stablecoins_will_have_to_reflect_and_evolve_to_live_up_to_their_name_%E2%80%9C\"><\/span>&#8221; Stablecoins will have to reflect and evolve to live up to their name &#8220;<span class=\"ez-toc-section-end\"><\/span><\/h1>\n<div class=\"post-content\" data-v-128018ef>In the case of stablecoins, unfortunately, the name is so far a misnomer. The fact that stablecoins are pegged to a \u201creal\u201d asset does not equate to stability. Traditional underlying assets are not exempt from market fluctuations, and with the majority of stablecoins pegged to fiat, they can be just as unstable.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2022-03\/b99ee949-8ed6-4005-a0ad-c5fc5f71f438.png\"><\/figure>\n<p>What the name could be, however, is aspirational \u2014 something that stablecoins might yet live up to if they can tie themselves to a solid foundation. <\/p>\n<h2><span class=\"ez-toc-section\" id=\"Where_did_all_the_stability_go\"><\/span>Where did all the stability go?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>At risk of confusing metaphors, stability is the currency of the day. Markets are volatile, debt levels are high and inflation is spiraling following the COVID-19 pandemic and ongoing supply chain problems. The cryptocurrency markets have benefitted as investors have searched for alternative stores of wealth. But, prices continue to see-saw up and down unpredictably.<\/p>\n<p>In search of a solution to volatility, the crypto community has gravitated toward stablecoins for the perceived stability afforded by their fixed relative valuation. A recent report by the Hong Kong Monetary Authority (HKMA) verified this trend, showing an explosive expansion of the stablecoin market since 2020 in terms of market capitalization. Payment firms are also jumping on the bandwagon, with PayPal recently announcing plans to roll out its own PayPal Coin, which will be backed by the United States dollar. <\/p>\n<p><strong><em>Related: <\/em><\/strong><strong><em>Fear not, investor: Finding stability amid crypto market volatility<\/em><\/strong><\/p>\n<p>And, therein lies the problem. Stablecoins are usually backed by increasingly unstable fiat currencies. Governments have printed $17 trillion worth of new money into the global economy amid widespread quantitative easing, simultaneously raising global debt levels and devaluing the purchasing power of the currencies that prop up stablecoins.<\/p>\n<p>As such, the growing trend toward stablecoins, although in many ways a step in the right direction, is due a re-think if they\u2019re to deliver on the promise of their name. <\/p>\n<h2><span class=\"ez-toc-section\" id=\"A_solution_worth_its_weight_in_gold\"><\/span>A solution worth its weight in gold <span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>With governments printing more and more fiat, we cannot afford to turn away from the potential of stablecoins backed by truly stable assets. In order for stablecoins to live up to the promise of \u201cstability,\u201d there must be a wider and more mainstream movement away from being backed by inflation-prone fiat currencies toward more reliable physical assets.<\/p>\n<p>Gold is the most logical option. Throughout all the turbulence that 2021 brought, the price of gold sat steadily between $1,700 and $1,950 an ounce, proving both its stability and value.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2022-03\/ccace5da-e8d9-4386-8f39-a55c64191967.png\"><\/figure>\n<p>But, tying a coin to a hypothetical store of gold doesn\u2019t go far enough. The underlying asset must be fully allocated and redeemable \u2014 one gram of gold for one token. That prevents the coin from distancing itself from the reality of the asset it represents and stops the coin contributing to debt growth. <\/p>\n<p><strong><em>Related: <\/em><\/strong><strong><em>Why betting on gold-backed stablecoins is a losing <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/game\/\" data-internallinksmanager029f6b8e52c=\"7\" title=\"Game\" target=\"_blank\" rel=\"noopener\">game<\/a><\/em><\/strong><\/p>\n<p>If the owner of a stablecoin is able to directly redeem the asset, they can provide an effective store of value and medium of exchange, beyond even the capabilities of modern monetary systems. <\/p>\n<h2><span class=\"ez-toc-section\" id=\"Renewed_calls_for_regulatory_oversight\"><\/span>Renewed calls for regulatory oversight <span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Such a currency would only be possible in a fully audited system, which is where the importance of regulation comes in. Ironically, a mass migration to stablecoins based on a somewhat unfounded assumption of stability could be the straw that topples the economic Jenga tower. <\/p>\n<p>Recent controversy around Tether (USDT) \u2014 the most widely used stablecoin and backed by the U.S. dollar \u2014 allegedly not having the dollars to back up their coin have been dismissed by the company and remain unverifiable due to it being essentially unregulated and unaudited.<\/p>\n<p><strong><em>Related: <\/em><\/strong><strong><em>Stablecoins under scrutiny: USDT stands by \u2018commercial paper\u2019 tether<\/em><\/strong><\/p>\n<p>The revelation contributes to the growing number of questions about how \u201cstable\u201d stablecoins actually are and what is being done to protect investors. <\/p>\n<p>Regulators around the world must continue to provide more oversight and double down their focus on increasing transparency. In fact, it was one year ago that Bank of England Governor Andrew Bailey made his own statement at Davos warning that crypto lacked \u201cdesign governance and arrangements for a lasting digital currency\u201d and that \u201cpeople need assurance that their payments are made in something with stable value.\u201d <\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2022-03\/0156ded9-0e1c-4b09-be2d-494edfe255d2.png\"><\/figure>\n<h2><span class=\"ez-toc-section\" id=\"A_way_out_of_the_inflation_crisis\"><\/span>A way out of the inflation crisis<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Despite their shortcomings, the potential for stablecoins to help us out of a post-COVID-19 inflation crisis should not be underestimated. They hold the capacity to preserve wealth and provide a stable store of value while offering traditional investors more certainty than other digital assets. <\/p>\n<p>As such, solving the stablecoin misnomer might just be essential to our economic survival.<\/p>\n<p>To truly harness their benefits, they must be pegged to a solid foundation in the form of a fully redeemable physical asset, like gold or silver. This would create a virtuous cycle of stability, driving greater institutional backing towards digital assets and further stabilizing the market and economy. <\/p>\n<p><strong><em>Related: <\/em><\/strong><strong><em>Wyoming\u2019s state stablecoin: Another brick in the wall?<\/em><\/strong><\/p>\n<p>Crypto\u2019s volatility is keeping many businesses \u2014 big and small \u2014 from adopting this type of payment method. Stablecoins may hold part of the answer, but their so-called \u201cstability\u201d is far from inherent. Assets like gold and silver on, the other hand, will continue to provide stable foundations on which to build for years to come.<\/p>\n<p class=\"post-content__disclaimer\"><em>This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.<\/em><\/p>\n<p class=\"post-content__disclaimer\"><em>The views, thoughts and opinions expressed here are the author\u2019s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.<\/em><\/p>\n<div>\n<div style=\"background: rgb(239, 239, 239); border: 1px solid rgb(204, 204, 204); padding: 10px;\"><strong>Jai Bifulco<\/strong> is the chief commercial officer at Kinesis Money and he has a track record of driving business growth with his diverse commercial and operational experience spans the fintech, precious metals, mining, financial services, investment and trading spaces. As a founding member of Kinesis, Jai brings his wealth of experience to driving the adoption of a truly ethical, global monetary system, which he believes will shape the future of precious metals and the monetary space.<\/div>\n<\/div>\n<p><template data-name=\"subscription_form\" data-type=\"markets_outlook\"><\/template><\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong>\n<\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/general\/\" target=\"_blank\" rel=\"noopener\">General category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/cointelegraph.com\/news\/stablecoins-will-have-to-reflect-and-evolve-to-live-up-to-their-name\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8221; Stablecoins will have to reflect and evolve to live up to their name &#8220; In the case of stablecoins, unfortunately, the name is so far a misnomer. The fact that stablecoins are pegged to a \u201creal\u201d asset does not equate to stability. Traditional underlying assets are not exempt from market fluctuations, and with the&#8230;<\/p>\n","protected":false},"author":1,"featured_media":412778,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/images.cointelegraph.com\/images\/1200_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjItMDMvOTI0NTExYWQtM2Q5MC00NTIxLThkYjItYjI5MzY5ZjZkODY4LmpwZw==.jpg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[74894,74863,75493,75541,74355,71835,70934],"class_list":["post-412777","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-blockchain","tag-cryptocurrencies","tag-stablecoin","tag-volatility","tag-adoption","tag-gold","tag-regulation"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/412777","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=412777"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/412777\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/412778"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=412777"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=412777"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=412777"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}