A report analyzing stablecoins – cryptocurrencies that track fiat currencies – has outlined the liquidity problems facing the economy, and a way to protect interests against these.
In its paper Analyzing the Development of Stablecoin from the Jackson Hole Economic
Symposium Conference, Zexmon Group, the blockchain advisory group has highlighted the benefits of stablecoins, in particular those that are backed by reserve currencies, for example OK Link’s USDK.
The report references the perspective of Mark Carney, the Governor of the Bank of England on the problems facing fiat currencies, in particular the United States dollar, and how stablecoins and even Facebook’s Libra can counter them.
“Mark Carney, the Governor of the Bank of England, also gave an eye-catching speech [at the conference]” it says.
“He emphasised that when the interest rate declines in the future, the global dominance of US dollar increases the risks of liquidity trap and therefore they should be looking to cure the dollar’s spillover effect as long term goal. The only way is to urge stablecoins, such as Libra, to end the USD supremacy dominance and establish a multi-currency reserve system, But Libra must be able to solve its own problems first.”
He says based on expected interest rate hikes from central banks globally, a surplus of US dollars might lead people to save instead of spend, putting pressure on the monetary system and forming a ‘liquidity trap’.
The report says to stop this from happening stablecoins could be used to break the over reliance on the US dollar and establish what the report calls a “multi-polar” reserve system.
“The mainstream finance industry … are exploring how stablecoin can revolutionize the whole finance industry, as well as the regulations and supervision needed for the new digital money,” it says.
USDK – a reserve-backed stablecoin
The report says despite launching in June, USDK, the stablecoin launched by OKEx sister company OK Link and US-based custody provider Prime Trust, is more trustworthy than the current largest stablecoin by market size, the Tether (USDT) created by BitFenix owners iFenix.
“At present, USDT has an absolute advantage in the stablecoin market. Yet the token’s accidental issuance and burnt, opaque audit, not fully backed by fiat equivalents, etc. have led the market to lose trust in the stablecoin,” the report says.
“Another stablecoin on the market is more trustable – USDK. USDK is a stablecoin powered by blockchain technology and US Licenced Trust Company.”
The report concludes: “USDK wins market’s trust by offering a completely transparent background and is fully backed by fiat currency. It fulfils what the market needs in a stablecoin.”