Stablecoins Continue to Mature
Stablecoins are coming into bloom as more digital exchanges, asset managers, and social media giants work to bring a variety of asset-backed tokens to market.
They were initially developed to speed the movement of fiat currency in and out of the cryptocurrency market.
The process typically could take three to five days depending on the cryptocurrency-trading platform’s policies and procedures, including its know-your-customer and anti-money laundering procedures, Meltem Demirors, the chief investment officer of digital asset manager CoinShares, told IntelAlley.
“For the first time, you could settle dollar-to-bitcoin trades on the bitcoin ledger, which was an innovation,” she said.
The fungible stablecoins allowed bitcoin transactions to settle within 10 minutes on the bitcoin blockchain without waiting three to five days for a wire to clear as well as move the cash equivalent between crypto wallets using the same method as other crypto assets.
However, more firms are taking on the role of a prime broker and eliminating the need for their clients to open and fund trading accounts on individual exchanges by trading via the prime broker’s account on each exchange.
More sophisticated traders have adopted stablecoins as a way to park money in the cryptocurrency market, which enables them to trade more systematically and opportunistically, according to Demirors. “Historically, that has not been a very big part of the crypto market. As we see more players in the market, we are seeing people want something equivalent to a money market account.”
CoinShares expects to release its own stablecoin, dubbed DGLD, in the coming weeks once it has finished the final phase of regulatory approval.
The stablecoin is the product of a Geneva-based joint venture amongst CoinShares, digital wallet-provider Blockchain.com, and Swiss gold-custodian MKS. Each token represents a tenth of a troy ounce of physical gold stored in MKS’ vault.
The joint venture has tokenized approximately $20 million in gold with most of the activity coming from high-net-worth clients who are holding the tokens in their own wallets, for the time being, she added.
Once the joint venture receives the final regulatory sign-off for the stablecoin, it plans to provide access to the financial instrument via Blockchain.com’s wallets and other platforms eventually.
The stablecoin is not available in the US, but the joint venture is working with US market regulators to develop a similar offering, according to Demirors.
The next focal point of the crypto market will be over-the-counter derivatives.
The consortium aims to grow its membership of FDIC-insured banks.
The venue is the first FCA regulated exchange, brokerage and custodian for digital securities.
Matt Zhang created the bank's spread products investment technologies team.
Coinbase Prime has been working to establish a market leading prime services offering.