Tether is seing bigger tradinvolumes than Bitcoin on a rolling 24-hourbasis, despite the fact that Tether’s market capitalization is much smaller than Bitcoin. This could be a sign, that investors and traders want stablecoins and cryptocurrencies that are pointed to, for example, the US dollar, to a greater extent than volatile cryptocurrencies such as Bitcoin, precisely because of its stable characteristics. It is not just the investors who see the benefit of stable coins, but now there are similar endeavors from national states and companies in payment solutions and government currencies.
Confidence crisis from the start
In 2014, Tether had a different name. At that time, it had the name “Realcoin” and was created by Stanley Hainsworth, the Vice President of Starbucks. Later that year, Tether was listed on the Bitfinex crypto exchange. It was later revealed through the investigative work of Paradise Papers that Bitfinex and Tether had the same owners.
Unclear ownership and presence in tax havens is not something that creates confidence in the world of finance, but increasing volume and adoption over the last five years have made Tether the most widely used stablecoin in the world.
It may tell us something that confidence and security are linked to the volume and maintenance of 1-1 pricing against dollars rather than regulations and perceived trust. Tether speaks for itself. Maybe that’s what the Chinese authorities want to achieve by digitizing their own currency. From inaccessible and obscure currency to the rest of the world to an available and liquid currency that makes it possible to circumvent US banking laws.
China is entering the scene
Chinese authorities have said they will launch a digital government currency in no time, and have made the country’s banks and major technology companies to be distribution partners. They themselves say the bet is a response to Bitcoin and Libra, but analysts point out that China has been trying for years to find alternatives to the US dollar when exporting goods and services. There are many regimes that China wants to trade with, but which the Americans are blocking through their dollar line to the FED.
Both the Swedish and Norwegian central banks have said that they are investigating the possibilities of introducing digital kroner. The central banks see a clear upside by removing physical cash and at the same time contributing to innovation in the financial sector. In addition, it becomes easier to monitor. Critics have to keep in mind that today you can withdraw $990 at the ATM and spend it on exactly what you want, without the authorities being able to investigate the transaction.
USA on the sidelines
CEO of the largest crypto exchange in the United States, Brian Armstrong of Coinbase, wrote on Twitter that he thinks it’s a shame that lawmakers in the West are sticking the wheels of bets like Facebook’s Libra. If the Fed or other authorities in the West do not want to compete with China’s digital coin, they must at least allow private companies like Facebook to take over the duty. That brings up questions like, why did he write it right now? Is it true that he got a heads-up that a Chinese is ready for launch with his digital coin?
There is also a battle between the partners of Libra. Companies that are natural competitors, retiring from the race, such as Paypal did before the weekend. These companies had been major onboarding channels for Libra, but they perhaps saw that they could also lose in the battle for market share and transactions. Libra announced in a press release that they have 1500 new partners from the retail, advertising and trade industries. There are players who primarily want to save money on lower fees and get a faster settlement method when using Libra.
Bitcoin and various forms of stablecoins are not competitors but complementary, because they have different properties. I do not shy away from the idea that all adoption is good adoption. As soon as someone has created a wallet and transferred fiat to a digital world, a lot is done in understanding how to use cryptocurrency, be it Bitcoin, Tether or a digital Krone.