Few years back, there were only a handful of stablecoins in the market that had no chance of competing with any credible currency. However, that is not the case today. Today, stablecoins are taking over the financial industry one step at a time.
We have reached a point where central banks and major companies like Facebook and Walmart are now getting their hands into it.
Corporate Stablecoins
Corporate Stablecoins can hold a large amount of power if they can get a large user base behind them.
Also, individuals and companies that use stablecoins pegged to a fiat currency of some other government may incidentally weaken the strength of their own national currency. Even if these Corporate Stablecoins support multiple currencies, the cultural and political influence that comes with them could be unsavory to several governments.
This also causes problems when companies favor certain governments. China banned Google and Facebook for being more inclined towards the US government. This decreases Libra’s chances of being accessible in China. China on the other hand is rumored to launch their own stablecoin.
Nicholas Krapels, Blockchain Lead at Konstellation.tech says
“China will be the first central bank to launch a CBDC (central bank digital currency).They’ve been researching it for years. They have a Digital Currency Research Institute and a wholly-owned company called Shenzhen Fintech Limited doing research on it. They have a bunch of patents for it.The Chinese economy is already virtually cashless, so it’s only a matter of time. I’d say either the CBDC or a CSC (corporate stablecoin) or both gets released before Libra does.”
Krapels However, backs Ant Financial, the owner of AliPay.
“The Chinese government forced this company out of the Alibaba Group holding structure because they correctly realized that it would be against their national interests for an innovative fintech startup, perhaps THE most innovative fintech startup (after all, it is already valued at more than Goldman Sachs) that is virtually rewriting the rules of e-commerce and digital money to be owned by non-Chinese (Japan’s Softbank and the US’s Yahoo),” he added.
“Significant Ant Financial stakes are held by all of the Big Four state-owned banks as well as the sovereign wealth funds. I don’t see how Huawei trumps that,” Krapels continued, “But hey! Who knows? A little domestic competition could be good. After all, we have no idea how a CSC will affect consumer buying patterns, investments, etc.”
“Probably there will be more room for a few of these CSC’s in any given economic region. Maybe Shanghai and Hangzhou are where AliCoin starts to gain a base market share. Huawei teams up with their Guangdong neighbor Tencent to do one that forms a base in Southern China. That would be my best guess.”
Walmart vs Facebook
“I’m really waiting to see what Walmart does with their proposed stablecoin. This is a company from the Heart of America, a true epitome of the American Dream, not some evil Silicon Valley geek corp like Facebook, that is proposing this high-tech concept that is hard-to-understand for many of the hoi polloi.”
“If Walmart keeps pushing this, it could receive a much warmer reception by regulators. Yeah, maybe because FB has primed them to be ready for such a thing, but also because a WalmartCoin just seems like a much more palatable concept.”
Krapels, added “Walmart already has a pretty robust financial infrastructure with numerous in-store MoneyGram and Coinstar outlets that are already specifically purposed to ‘banking the unbanked,’”
“Walmart [also] has 2m+ employees that could potentially be paid every 2 weeks, [and] for the vast majority of America, Walmart is THE place to shop… for everything. Domestic revenue was $332B last year (up 50% since the 2008 financial crisis), while international revenues have remained flat for almost a decade at ~ $120B.”
“For mainstreaming bitcoin and its alt brothers, the WalmartCoin seems to me to be a much bigger deal, if it ever moves past the concept stage.”
Who will win?
So who will win this war? It is too early to tell. Krapels believes there will always be competition in the market: “I doubt there will be one GlobalCoin (as Libra was first called),” he said. “There will just be too much competition in that space.”
“I think that if world regulators eventually accept this Corporate Stablecoin concept (and there’s no guarantee that it ever will because minting money is one of the sources of power for any government) then we will see these Corporate Stablecoins dominate their industry vertical or their particular region, The easy answer is competition should be based on how these products interact with CBDC (if any) and bitcoin,” he added.
“As with crypto exchanges, the key differentiator often comes down to fiat onramps. If that’s the case, the CSC with more buy-in from their own local government (and others) wins.”
For example, “if ‘AliCoin operates in a country where it is easy to swap into a CBDC and then that money can be spent freely on phones everywhere in the country, then it will dominate that country. However, it will not have this built-in advantage when it goes outside of mainland China.”
“That’s where I think the ability to swap into bitcoin will become very important in other countries,” he added. “Especially those that are a long way from having a CBDC.”
Only Time will Tell.
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