Page 11 - July 2018 Disruption Report

DIGITAL CURRENCIES
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The virtual currencies issued by private entities are fundamental flaws given their volatility, low public trust, and limited useable scope. ...Therefore, it’s inevitable for the central bank to launch its own digital currency to upscale the existing circulation of the fiat currency. (The Blockchain Journal, Guillaume Belisle, 06/26/18)
According to the EU report, Competition Issues in the Area of Financial Technology, the authors cautioned:
The arrival of permissioned cryptocurrencies promoted by banks, even by central banks, will reshape the current competition level in the cryptocurrency market, broadening the number of competitors. However, the market power of banks in traditional banking services might be used to limit competition in the cryptocurrency market through pre-emptive acquisitions or predatory pricing schemes. (Competition Issues in the Area of Financial Technology, Fraile Carmona, A. Gonzáelez-Quel Lombardo, R. Rivera Pastor, C. Tarín Quirós, J. P. Villar Garcia, D. Ramos Muñoz, L. Castejón Martín, July 2018)
How will the crypto-dollar “stable coin” work?
On April 13, Basis completed a $133 million private placement—from investors such as Andreessen Horowitz, Baine Capital Ventures, Lightspeed, Kevin Warsh, Google Ventures and Polychain Capital—to create a fiat-collateralized “stablecoin” that the founders hope will be less volatile that other cryptocurrencies. A “stable coin” is a global cryptocurrency that’s pegged to another stable asset, such as gold, the U.S. dollar or other fiat currency, and has low volatility, relative other cryptocurrencies. “Together, we are building a cryptocurrency with an algorithmic central bank that we believe will make cryptocurrency stable and usable around the world,” according to Basis’ website.“
On July 17, Stronghold launched the “Stronghold USD Token” (Stronghold USD)—the first and only venture-backed U.S. dollar token backed with reserves held by Prime Trust, a state-chartered trust company. Stronghold is using Stellar’s blockchain protocol to issue and transact Stronghold USD tokens to provide access to liquidity through its institutional exchange services and the custodial relationship with Prime Trust.
Stronghold is also collaborating with IBM to explore the possibility of creating a “stable coin” digital asset that runs in parallel to physical cash (held at a regulated, state-chartered trust company) on the IBM blockchain platform. The effective use of an asset-backed token, like Stronghold USD, can serve as a new liquidity tool for real-time foreign exchange and international settlement and enable banks to issue credit into transactional networks and trade ecosystems.
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