June 14, 2021

The role of stablecoins and digital currencies of the Central Bank in the crypto market

The role of stablecoins and digital currencies of the Central Bank in the crypto market

There are two types of cryptocurrencies on the cryptocurrency market, which from the outside may seem similar, but in reality they perform completely different functions. We are talking about stablecoins and central bank digital currencies (CBDC).

The former are backed by real assets, for example,fiat currencies, while the latter is a new form of national money. And if central banks and governments are working on the launch of CBDC, then private companies are responsible for issuing stablecoins. Let's figure out how stablecoins differ from CBDC and what is the role of these assets in the crypto market.

Stablecoins and CBDC on the example of Russia

Let's start with a simple example:The head of Sberbank, German Gref, has repeatedly said that his bank is developing a stablecoin called Sbercoin, the rate of which will be pegged to the ruble. It was assumed that the new form of digital currency will be presented in the spring of 2021. However, after the company filed an application with the Central Bank of the Russian Federation in January to register its blockchain platform, on which the ruble stablecoin would be launched, there was no more news about the project.

Moreover, the Bank of Russia and the Ministry of Finance do notsupport Gref's idea, and also openly oppose private banks having their own currency. Back in April, Ivan Zimin, director of the Central Bank's Department of Financial Technologies (DFT), said that the regulator is thinking about limiting the use of stablecoins in settlements similar to unsecured cryptocurrencies.

At the same time, according to the current Russianstablecoins do not belong to the category of digital currencies by law, therefore, settlements in them in Russia are not prohibited. Under the law "On CFA", which entered into force in January 2021, stablecoins can only be issued by operators listed in the register of the Central Bank. However, the Central Bank insists that the digital ruble should be issued and supported by this financial regulator.

“We are, in fact, like the Central Bankwe adhere and constantly adhere to the following ideology that both cryptocurrency and stablecoins cannot be official means of payment, only the digital ruble can be such means "- said Zimin. His position is also supported by the Ministry of Finance.

How are stablecoins different from CBDC?

Let's continue the example with the digital ruble andpotential stablecoin from Sberbank. German Gref's coin, even if it will be tied to the national currency rate, and also backed by it, will not be issued by the Central Bank. And this contradicts the policy of financial regulators in the overwhelming majority of countries in the world, since it undermines their right to issue money.

If the digital ruble, that is, CBDC, isthe obligation of the Bank of Russia, in fact, an additional form of money to cash and non-cash, then stablecoins are a digital currency issued by a private company or organization and secured by some kind of obligations: money, gold, precious metal or any other real asset.

Another illustrative example is related toFacebook's stablecoin Diem (formerly Libra), which it planned to launch back in 2019, but was unable to do so precisely because of problems with financial regulators in a number of countries.

Back in the fall of 2019, the G7 group, or “Bigseven ”, prepared a report in which she stated that stablecoins threaten the global financial system. The finance ministers of the G7 countries stressed that proprietary currencies from technology companies such as Facebook carry risks for users, as well as dangerous from the point of view of possible laundering of criminal proceeds.

At the same time, French politician Bruno Le Maireclaimed that cryptocurrency from Mark Zuckerberg's social network poses a threat to national currencies in both underdeveloped and developed countries. According to the politician, Facebook's Diem cryptocurrency is usurping the sovereign right of states to issue their own currencies. And this is probably the main difference between stablecoins and CBDC.

Moreover, the news that Facebook canto release its own stablecoin, pushed states to develop their own national cryptocurrencies. For example, in 2019, against the background of a social network project, Germany, Sweden and other countries reported this.

According to the Bank for International Settlements (BIS),In August 2020, about 80% of Central Banks around the world worked on the launch of national digital currencies (CBDC). To date, some of them have already tested their CBDCs, while others are developing.

China as a Leader in CBDC Development

In April Bloomberg published material inwhich described the concern of the administration of US President Joe Biden with China's successes in issuing the CBDC - the digital yuan (DCEP). Some US officials are concerned that China is trying to deprive the dollar of its leading position in the global financial system.

Now tests of a new digital currency are underway incities of Shenzhen, Suzhou, Chengdu and the new state-level Xiong'an, Hebei province. In one test, which ended earlier this year, residents of Suzhou made nearly 140,000 purchases using the digital yuan for a total of $ 3 million. During the test, the country's authorities distributed DCEP through a lottery. A total of 95,600 tickets were activated, each containing 200 digital yuan.

China plans to use the digital yuan in Beijing during the 2022 Winter Olympics.

The role of stablecoins in the cryptoindustry

As of May 13, the capitalization of theUSDT, a popular dollar stablecoin from Tether, is $ 57.8 billion.At the same time, the daily trading volume with a stable cryptocurrency is more than $ 233 billion.This is three times higher than that of other leaders of the crypto market - BTC and ETH, the daily trading volume of which is $ 106 and $ 98 billion respectively.

The secret of USDT is simple - it trades on mostthe largest cryptocurrency exchanges, as it allows traders to fix profits without converting funds into fiat. It's cheaper and also easier for the platforms themselves in terms of regulation. Maintaining trading pairs with a stablecoin backed by the US dollar is not the same as working directly with the local currency. At the same time, there is almost no difference for the user. When converted, the USDT price will almost always be equal to $ 1.

The stablecoin market is just beginning to develop,however, it is already clear that it has the potential to become widespread among users, even those far from the world of cryptocurrencies. For this, stablecoins should be actively used as a means of payment, as well as for money transfers.

Where is it more profitable to buy cryptocurrency? TOP-5 exchanges

For a safe and convenient purchase of cryptocurrencies with a minimum commission, we have prepared a rating of the most reliable and popular cryptocurrency exchanges that support deposit and withdrawal of funds in rubles, hryvnias, dollars and euros.

Site reliability is primarily determined bytrading volume and number of users. By all key metrics, Binance is the largest cryptocurrency exchange in the world. Binance is also the most popular cryptocurrency exchange in Russia and the CIS, since it has the largest turnover of funds and supports transfers in rubles from bank cards Visa / MasterCard and payment systems QIWI, Advcash, Payeer.

Especially for beginners, we have prepared a detailed guide: How to buy bitcoin on a crypto exchange for rubles?

Rating of cryptocurrency exchanges:

# Exchange: Website: Rating:
1 Binance (Editor's Choice) https://binance.com 9.7
2 Bybit https://bybit.com 7.5
3 OKEx https://okex.com 7.1
4 Exmo https://exmo.me 6.9
5 Huobi https://huobi.com 6.5

The criteria by which the rating is set in our rating of crypto-exchanges:

  • Work reliability - stability of access to all platform functions, including uninterrupted trading, deposit and withdrawal of funds, as well as the period of work on the market and the daily trading volume.
  • Commissions - the size of the commission for trading operations within the site and the withdrawal of assets.
  • Feedback and support - we analyze user reviews and the quality of technical support.
  • Convenience of the interface - we evaluate the functionality and intuitiveness of the interface, possible errors and failures when working with the exchange.
  • Platform features - availability of additional features - futures, options, staking, etc.
  • final grade - the average number of points for all indicators, determines the place in the rating.

The role of stablecoins and digital currencies of the Central Bank in the crypto market


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