Lynn Johannson, Advisor, Sustainability and ESG
January 4th, 2024
Lynn Johannson, President of E2 Management Corporation and Catalyst for THE Collaboration
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Stablecoins: Experience the Stability
3iQ and Mavennet | Fred Pye and Kesem Frank | June 18, 2019
Stablecoins are now a necessary step to mass adoption of cryptocurrencies, as proven by the way they’ve been used to hedge the massive volatility of the market over the past couple of years. Their simple premise enables the seamless pairing of crypto-to-fiat pegged cryptocurrency. It might sound overly simplistic, but this straightforward innovation has spurred the growth of a new crypto asset class that measures in billions of dollars in aggregate market cap (e.g. Tether, USD Coin, TrueUSD, Paxos and Gemini Dollar).
As much as this asset class is still gaining momentum driven by the current and common use case, the potential of stablecoins goes well beyond the tactical value of a trading tool.
Stablecoins are strategically important because they represent a bridge between legacy fiat-based systems and the new digital and decentralized currency underpinnings we collectively call “blockchain.”
The dream isn’t necessarily a prediction or extension of the purist’s vision
Bitcoin - blockchain’s earliest network - was born from tumultuous years in the traditional financial system. These were years defined by mistrust; not just towards the people at the helm of the financial system, but of the system itself. It’s no surprise that Bitcoin’s innovators and early adopters were driven by a vision of an extraneous system that completely rejected the legacy framework, giving birth to decentralization, immutability and deflationary currency to name a few.
See: FaceCoin: Here’s What Facebook Could Build In Blockchain And Cryptocurrency
Early blockchain advocates argue this is the only acceptable implementation for this technology, with any deviation being a compromise. However, it is the same purist vision of “utility backed value” that makes bitcoin (and other cryptocurrencies that follow similar design) incredibly susceptible to speculation and volatility.
Regardless of where you stand, it is important to clarify that this article is by no means meant to criticize the original blockchain. The questions we pose are not around bitcoin’s value, rather on its stability and ability effectively deliver the utility necessary for any currency.
Do stablecoins and “just” tokenizing fiat currencies deliver enough benefit?
The short answer is yes. Blockchain is an incredibly powerful architecture that provides significant benefits to the assets represented on it. There are many key benefits to blockchain based tokenized fiats, however speed, span and cost are worth a closer look.
A tokenized asset can be moved around the globe at an efficiency that user of current day systems could never dream of, let along compete with. A transaction between wallet holders on opposite sides of the globe would be settled in seconds (or minutes, depending on the network) not days or hours for an average fee totaling fractions of a dollar regardless if they are worth a few dollars or a few million dollars.
Blockchain architecture is vastly beneficial even when the assets it underpins aren’t “crypto-native.” Specifically, the transparency and immutability inherent to the architecture enable incredibly powerful new methods of bookkeeping and reporting such as Triple Entry Accounting (TEA) as well as Automated Audits. These pose a substantial improvement to current accounting tools, that eventually will change the risk profile inherent to every financial transaction.
See: Is This Behind The Latest $25 Billion Bitcoin And Crypto Price Rally?
Even the trivial action of checking on your assets involves logging-in or calling our bank and asking it to report back what and how much is owned – lacks a true, direct line of sight.
Let’s get really, boring.
Even the most adherent purist will admit that the power blockchain vastly increases with the growth of its userbase. So basically, it is in everyone’s
best interest, early adopter and newcomer alike, for the network to grow by appealing to the mainstream.
Thankfully, there is an army of people working to facilitate better, more palatable access to crypto for a wide array of audiences. Many of them have been educated by some of the most profound processes of digital transformation of recent decades, and are leaning on these insights to lean on applicable lessons for this particular opportunity.
For instance, let’s look at smartphone adoption. In just a decade the majority of the world’s population has been converted into devoted user of the technology. While there are multiple applicable takeaways and lessons to analyze, consider the name itself “Smart-Phone.” If you own one, it probably isn’t necessary to point out that most of the time the “phone” aspect of the device isn’t used at all. In fact, data shows that “calling people” isn’t even a top ten use for most users. Still, there is a very important reason that these pocket computers were named “phones”; to spur their adoption. Anchoring the terminology to something people widely understood, the phone, enabled it to be familiar and easily adoptable. It is much easier to have a meaningful conversation, when we have a common mental framework to base it on.
What’s next?
While they’re based on new and different technology, for stablecoins to go mainstream they must rely on an ideal, common framework that most people readily accept (or a simple formula such as one coin equals one dollar). If we can agree here, we can progress to having the more important conversation as to why the coin is actually a better dollar than a dollar, but we’ll be doing so standing on a solid and shared foundation.
See: Architecting a New World: Investment Crowdfunding and Digital Assets
Currently, we are in the process of an implementation that will inherit all the benefits covered above but will also comply with the applicable regulation/ legislation in place. In current markets dominated by USD based stablecoins, it is important to remember that we need to deliver efficiencies around foreign exchange for stablecoins to truly become strategic in importance. This will be possible through a Canadian Dollar backed crypto asset such as Qcad, that will unlock the next adoption stage of blockchain and will generate direct benefits for Canada.
Stablecoins will continue to play a major role in broader crypto adoption, and for our part; a CAD-backed crypto asset will be an important step in the evolution to mainstream adoption of blockchain. We are very excited to be engaged in architecting the future of financial systems; good things are coming.
Fred Pye, President and CEO, 3iQ
Fred kick-started his career as a precious metal and foreign exchange trader at Guardian Trust. He later joined Fidelity Investments, where he was part of a team that saw its assets rise from 85 million to over 7.5 billion. Next, Fred started his own firm, which worked diligently with Canadian regulatory bodies to establish the first mutual fund in Canada that was allowed to take short positions. Finally, as founder and CEO of 3iQ, he and his team have worked cooperatively with the OSC for the last 2 and a half years to launch the first regulated Bitcoin fund in Canada. This fund will be the first major exchange-traded cryptocurrency fund in North America.
Kesem Frank, Chief Maven, Mavennet
Kesem is a technology strategy expert specializing in blockchain powered enterprise architecture. Following a leadership position in Deloitte’s Blockchain practice, Kesem co-founded Nuco, one of the earliest enterprise blockchain platforms and a founding member of the Enterprise Ethereum Alliance. In his capacity as COO, Kesem led multiple projects, positioning blockchain at the core of future business platforms for fortune-1000 companies.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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