London Blockchain Conference 2023: Stablecoins and not-so-stablecoins
After lunch on Day 1 of the 2023 London Blockchain Conference (LBC), the corporate stage hosted a discussion on the merits and future of stablecoins in the digital asset ecosystem and wider economy.
In addition to a busy day of blockchain talks and networking, LBC 2023 attendees were treated to an afternoon panel titled “Stablecoins and Digital Currencies,” where three industry insiders gave their two cents on the sometimes controversial subject of stablecoins.
“Stablecoins are primarily an infrastructure project, it can still be profitable to run, but you have to go through the first phase of an infrastructure project,” said Bernhard Müller, General Manager & Chairman of Centi Ltd., a company that has recently issued the first Swiss Franc Stablecoin.
Müller spoke from experience about the regulatory hurdles, depending on the jurisdiction, that must be overcome to get stablecoins off the ground. Fortunately for Centi, “there was clarity about the regulations quite quickly,” Müller said. However, it’s not always easy, as fellow panelist Niels van den Bergh, CEO of mintBlue, explains:
“There is a lot of regulation involved in getting into stablecoin… it depends on timing and opportunity.”
Van den Bergh said once you get past the regulatory barrier to entry, stablecoins could open up “a whole new world” of possibilities, especially for a tech startup.
In this regard, he was talking about fiat-backed stablecoins, such as Tether, which is (supposedly) backed 1:1 by USD. But the panel did touch on the more divisive topic of algorithmic stablecoins.
The broaching of this topic drew chuckles from the packed room of attendees and broad agreement from the speakers regarding the merits of algorithmic stablecoins: the verdict was that they were fundamentally unstable.
Algorithmic stablecoins often have no reserve assets, which sets them apart from traditional stablecoins. Instead, they control supply through smart contracts and an algorithm, meaning they are particularly vulnerable in a crisis.
“Algorithmic stablecoins could theoretically work until it really matters to be stable. When there is a market downturn, they historically fail in these cases,” explains Müller.
The panel’s third speaker, Tokenized CEO James Belding, went further, suggesting that algorithmic stablecoins are “doomed to fail”.
However, Belding was more optimistic about the future of non-algorithmic stablecoins, saying, “I think (stablecoin) will be picked up quickly by the big financial players…it will be taken more seriously soon, and they will make some big changes.”
Some of these “major financial players” could be central banks, most likely pointing to central bank digital currencies (CBDCs): “Stablecoins are a very exciting proof of concept and a springboard to CBCDs,” suggested Belding.
When asked if a company like Centi, which produces a Swiss Franc Stablecoin, could develop into a de facto CBDC or ‘federal reserve’, Müller replied: “As a private company no, but the technology could certainly be used. “
Jokes and big dreams aside, a major theme discussed in the panel was trust and accountability, which the panelists agreed stablecoins could provide if done properly, transparently and within the law (here we look at you , Tether).
“A stablecoin is on a public ledger, it is publicly verifiable and anyone can check it,” Müller said. Belding added: “It removes black boxes and potential fraud…it fundamentally simplifies things from an accountability standpoint.”
At least this is the theory, and given the agreement of the panelists and the warm reception of the audience to the conversation, there is enough confidence in the ideas and capabilities of stablecoins to push the technology to greater adoption and application.
Watch: Swiss Franc Stablecoin Built by Centi on BSV
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