How Adoption Of Cryptocurrency Stablecoins Can Open Access To The 1.7 Billion Unbanked and Poor – Forbes

Public retail adoption of stablecoins might occur more rapidly in countries without a strong banking infrastructure.

The 2017 Global Findex database, launched with funding from the Bill and Melinda Gates foundation, points to advances in digital technology that are key to achieving the World Bank goal of universal financial access.

Stablecoin initiatives are developing at a rapid pace.Adoption of stablecoin, a form of collateralized cryptocurrency pegged to a stable fiat currency like the yen or dollar are being debated by central banks.This is a good signregulators are discussing how blockchain style coins can become mainstream payment options.However in developed economies where the banking sector is more established, regulators are still cautious of risks.

While the basic use-case for the mass adoption of stablecoin is as a potential fiat-currency replacement, how those coins are implemented is hotly debated.Coins collateralized by traditional currency, like the euro, United States dollar or the pound can be structured in different ways.

Based on the European Central Bank (ECB) paper In Search For Stability In Crypto-Assets: Are Stablecoins The Solution? (August 2019), stablecoin adoption, particularly in well-regulated countries, for example counties in the European Union, would need definitive rules governing the accountability of the issuer, decentralization responsibilities, and clear guidelines for what underpins the value of the asset before widespread implementation can occur. Last months statement by the French finance minister regarding the intention to block Libra development in France makes it clear that stablecoin adoption has challenges.

At the same time institutions like the Financial Markets Authority (AMF), part of the French financial regulatory system, announced in July 2019 plans to create a voluntary regulatory framework for crypto firms.

While Libra may face an adoption risk among European nations, it seems clear that coin development will continue.

Recently the president of the ECB said in a letter, dated September 26, 2019, that it is exploring the potential of crypto assets and assessing their impact to monetary policy and retail implications.In the letter the ECB president, Mario Draghi, said that new stablecoin arrangements (such as Libra) backed by large technology companies could have potential for widespread adoption.

However in the same letter a number of concerns were cited where stablecoin initiatives were untested and gave rise to a host of risks and issues.

For proponents of stablecoin adoption, central bank media coverage combined with Facebooks determination to create Libra suggest collateralized coins will have a future, especially in retail payments, sometime in the coming years.

But where can stablecoin trading and exchange find a foothold as a true monetary option in the short term?

Potential adoption can have a competitive advantage in countries where currency volatility, compounded by a poorly regulated banking system or nonexistent financial infrastructure, is the norm.Stablecoin trading can provide access to banking with less volatility, compared to economies where the financial system is viewed with a lack of trust. Venezuela is a good example.

The 2017 Global Findex database, lunched with funding from Bill and Melinda Gates foundation, points to advances in digital technology are key to achieving the World Bank goal of universal financial access. The same report highlights that 1.7 billion people lack a bank account.Stablecoin can become a path for the unbanked to create a stable store of monetary value and exchange. If access to digital technology increases across all nations, the implication for the unbanked and poor may well be widespread crypto adoption over local and less resilient financial systems.

An adoption strategy to watch is where stablecoins can offer an alternative to hyperinflation, offer price stability and financial access to the public.

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How Adoption Of Cryptocurrency Stablecoins Can Open Access To The 1.7 Billion Unbanked and Poor - Forbes