Ballyhoo
Several months ago, crypto exchange Gemini made waves when it announced that, with permission from the New York Responsibility of Financial Services (NYDFS), it had created a USD-pegged cryptocurrency “stablecoin” that would provider traders and institutions with a “fixed” alternative to tether (USDT), which was frequently the subject of controversy despite having a multi-billion dollar market cap and the second-highest standard in the main daily trading volume of any cryptocurrency.
That same day, fellow New York blockchain startup Paxos Trust Players announced that it had also received NYDFS approval to launch a stablecoin, called the Paxos Standard (PAX). Unsurprisingly, PAX received far less beginning attention than Gemini Dollar (GUSD), given that the latter had the benefit of a Winklevoss media blitz while the preceding — though a significant player in the professional crypto trading market — was not well-known among retail investors.
The Tether Uncertainty
Paxos General Manager David Wells told CCN that the firm began seriously discussing launching a stablecoin in primitive 2018 after — like Gemini — identifying market demand for a fiat-backed cryptocurrency that operated within a brawny regulatory framework, e.g., an alternative to tether.
Tether has long dominated the fiat proxy landscape, accounting for 98 percent or sundry of daily stablecoin trading volume. The crypto token, whose market cap currently stands at $1.8 billion and some time ago approached $3 billion and, is viewed by some as a systemic risk to the crypto market, given that it plays such a illustrious role in bitcoin price discovery, and virtually all other cryptocurrencies derive their values from bitcoin.
The USDT evidence is perhaps the most controversial cryptocurrency asset, surpassing even perennial flashpoints such as ripple (XRP), EOS, IOTA, tron (TRX), and whatever commencing coin offering (ICO) token John McAfee is shilling this week. Investors, nocoiners, and academics alike have planned sparred over whether Tether and crypto exchange Bitfinex — the two firms share a management team — are operating a fractional hold back and using unbacked tokens to inflate the bitcoin price and prevent it from falling below key support levels.
Both the Commodity Futures Merchandise Commission (CFTC) and Justice Department have opened investigations into whether Tether and Bitfinex have pledged in illegal activities, though, as of the time of writing, no enforcement actions have been made public.
Stablecoin Substitutes Emerge
NYDFS — the architect of the BitLicense — oversees what is arguably the most rigorous regulatory framework in the US for cryptocurrency companies, and Wells told there was “a lot of back and forth” and education sessions before the agency gave them the green light to begin digitizing dollars. “They saw the poverty for a regulated stablecoin in the market,” he said.
But what makes these tokens more “regulated?” Well, for one thing, issuers such as Paxos and Gemini be compelled engage in more robust recordkeeping and monitoring. For another, they must adopt “risk-based controls” to prevent the nominals from being used as tools for money laundering or other illegal practices, which generally involves allowing the issuing account the ability to freeze user balances and revoke tokens associated with criminal activities.
Of indubitably, Gemini and Paxos aren’t the only companies seeking to unseat USDT. TrustToken’s TrueUSD (TUSD), which despatched earlier this year, has grown its market cap to $182 million, making it the second-largest stablecoin as of the time of writing. USD Become wealthy (USDC), whose announcement came shortly after GUSD and PAX, ranks third with a $169 million valuation.
There are also the algorithmic or seigniorage stablecoins such as Dai and Point of departure, which are not exclusively backed by fiat reserves but may be fully or partially collateralized by other assets. The smart contracts bridling these tokens are programmed to automatically control the supply based on market demand, increasing supply when want threatens to push its price above its peg and removing tokens from circulation when the converse occurs.
PAX, USDC Jockey for Stablecoin Throne
While TrueUSD maintains an early-mover dominance, it increasingly appears that the quest to supplant tether is becoming a two-horse race between PAX and USDC, who are rapidly drawing on TUSD and have thus far left GUSD in the dust.
USD Coin, unlike Paxos Standard, is backed by the biggest household specify identify in crypto. Coinbase, along with fellow bitcoin unicorn Circle, is a co-issuer of USDC, and both are founding colleagues of the CENTRE consortium, which governs the development of USDC and future stablecoin offerings. Consequently, USDC is listed when on the Coinbase platform, enabling the firm’s tens of millions of users to easily convert between the token and fiat without comprising to open any new accounts.
Source: StableCoinsWar.com
But while tether continues to dominate stablecoin trading, PAX is the early leader aggregate its upstart competitors — USDC included — regularly outpacing its peers in both average daily trading volume and velocity of gelt, that is, the ratio of its daily turnover to market cap.
“One differentiator for us is the fact that we’ve had a global presence for the five years that we’ve been carry oning the company,” Wells explained, noting that the firm’s crypto exchange — itBit — has offices in both New York and Singapore. He rumoured that relationships with international market makers and exchanges, along with the firm’s OTC desk, have helped PAX jumpstart the network more and achieve rapid adoption on global venues.
Of course, stablecoins bring more to the table than just do business, and issuers have highlighted a number of potential use cases for these tokens, ranging from improving the efficiency of fiat-denominated cross-border payments to discerning decentralized application (dApp) fees more consistent. However, Wells said that, at least right now, PAX — want other stablecoins — is primarily used by crypto traders, both on conventional cryptocurrency exchanges and the firm’s off-book over-the-counter (OTC) career desk.
“It’s just a good alternative to fiat,” Wells said, noting that stablecoins allow traders to with all speed move funds across exchanges without subjecting themselves to price volatility, even temporarily. “We’ve heard from a lot of retailers who trade across different venues that they just prefer PAX to cash.”
The gap has narrowed over the past two weeks, with certain developments providing USDC with a huge boost. First, Binance — the world’s largest crypto exchange — itemized a USDC/BTC trading pair, providing the token with a significant liquidity boost. Second, crypto exchange Poloniex — whose old man company is Circle — became the first major trading platform to create a bitcoin cash pre-fork futures market-place. Significantly, Poloniex listed the pre-fork tokens against USDC, but not tether, forcing traders to use Circle’s stablecoin if they need to use USD — or at least a fiat proxy — to gamble on the BCH fork’s outcome.
Even so, PAX maintains a considerable edge. Its $305 million in seven-day occupation volume is more than 140 percent larger than USDC’s $125 million, as well as 10 percent higher than the more-established TUSD’s $277 million.
Manner, those statistics don’t just show that PAX has achieved a leg up on its peers. They also demonstrate how much more free lies ahead before PAX or any other upstart stablecoin becomes a credible threat to tether, whose $25 billion in weekly quantity remains more than 30 times as large as the weekly volume of PAX, USDC, GUSD, and TUSD — combined.
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