Stablecoins combine the benefits of a blockchain (e.g. transparency and speed), without the inherent volatility risk of crypto-currencies.
Fiat-backed stablecoins enable fast financial processes and have low to zero processing fees. They are transparent, borderless, and programmable. Stablecoins can reduce counterparty and settlement risk, decrease capital requirements and enable instant value transfer.
Conventional payment systems involve the movement of E-money across multiple private databases (of banks, money transfer organizations etc.). This is why typical cross-border payments involve high cost and time.
Blockchain technology removes the characteristic of infinite reproducibility from a digital asset. It confirms that each unit of value was transferred only once, solving the long-standing problem of double spending.
A stablecoin runs on a blockchain, and not in private databases, and that is why movement of stablecoins can happen in real-time at near zero cost.
The United Nations recognizes 180 currencies across the world – Indian Rupee, US dollar, Euro, Japanese Yen, etc. E-money is a digital representation of fiat currency used to electronically transfer value denominated in fiat currency. E-money is a digital transfer mechanism for fiat currency – i.e. it electronically transfers value that has legal tender status.
Stablecoins are E-money and not virtual or crypto currencies. This makes stablecoins legal in most countries.
The Stably Blog has identified several use cases for stablecoins including:
- Safe Haven Asset
- Trading (by removing fiat on-ramps and off-ramps fees)
- Payments (by removing 2-3% transaction fees)
- Cross-border payments and remittance (by removing transaction fees and time delays)
- 24x7 settlements
- Automated escrows
- High-yield borrowing and lending
- Alternative Banking
- Powering Decentralized Applications
On 4th January 2021, the United States Comptroller of the Currency clarified national banks’ and federal savings associations’ authority to participate in independent node verification networks and use stablecoins to conduct payment activities and other bank-permissible functions.
US national banks and federal savings associations can participate in independent node verification networks and use stablecoins to conduct payment activities and other bank-permissible functions.
Conventional stablecoins are not stable!
Conventional stablecoins are not stable! Consider a USD pegged stablecoin like Tether (USDT), USD Coin (USDC), or Binance USD (BUSD). Their values are not $1 most of the time. Their all-time highs and lows are:
USDT: $1.21 and $0.8995
USDC: $1.11 and $0.9292
BUSD: $1.11 and $0.8861
In case you are wondering, this does NOT include exchange fees or withdrawal fees. That's extra!
What makes HyFi Stablecoins special?
We believe that because of its inherent advantages, including 100% KYC and AML compliance, HyFi Blockchain will emerge as the blockchain of choice for bank-operated fiat-backed stablecoins.
Since HyFi Stablecoin can only be issued by licensed banks, the counterparty risks, as well as regulatory constraints will be minimum.
HyFi Stablecoins will always be stable – a USD stablecoin will always be priced at exactly $1, a Euro stablecoin will always be priced at exactly 1 Euro, and so on...