Concordium’s Lars Seier Christensen believes that while stablecoins may not be popular in New Zealand, they are still the #1 use case for blockchain.
Posted: February 16, 2024 11:28 AM Updated: February 16, 2024 11:28 AM
Correction and fact check date: February 16, 2024, 11:28 AM
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The founder and chairman of Concordium shared with Metaverse Post that stablecoins remain the most important use case for blockchain.
In a recent statement, New Zealand Reserve Bank Governor Adrian Orr questioned the very purpose of stablecoins, declaring that “stablecoins are not stable,” which stands in contrast to the numerous global governments seeking to implement them. It was a surprising contrast.
The Terra-Luna scandal makes for a notable case study to support the banking authorities’ claims, but as the industry develops and the market matures, such statements could create confusion about both the potential and real-world applications that stablecoins are already performing. I can give it to you.
There are examples of stablecoins showing greater volatility than the name suggests, but as with any new technology, including cryptocurrencies, there are growing pains, but they are not insurmountable.
In a conversation with Metaverse Post, Concordium founder and president Lars Seier Christensen shared his thoughts on stablecoins, saying they are the most essential use case for blockchain overall, primarily due to their potential to facilitate international remittances and payments. It was emphasized that . Layer 1 blockchain platform Recently incorporated EUROe stablecoin.
Responding to the Bank of New Zealand’s strong comments, Governor Lars Seier Christensen said the governor seemed to be thinking about algorithm-based stablecoins rather than asset-based stablecoins.
“Algorithm-based stablecoins have led to several disasters, and I personally would not rely on such projects,” Christensen told MPost. “Stablecoins must be backed by liquid assets and must not be overcollateralized.”
Nonetheless, the potential use cases for personal and corporate integration of these digital assets are vast. Stablecoins have therefore prompted EU and EBA regulators to establish guidelines to maintain adequate fiat reserves and strengthen safeguards to mitigate loss of value.
Stablecoins are one of the few Web3 sectors that have received consistent attention from TradFi players over the past few years. “You can look at Mastercard, Visa and Paypal to see how far they have come and how they have integrated technology into their services, which is a clear sign of long-term design for implementation and mainstream adoption,” said Christensen.
In addition to the promise of improving the efficiency of payment systems and financial inclusion, the growing interest in these digital assets is also driven by other key factors, such as traditional financial benefits and the establishment of guardrails in many jurisdictions. The latter promotes investor and institutional trust.
“TradFi players see stablecoins as an opportunity to complement their services and optimize cross-border transactions and currency exchanges, as well as to do so within government frameworks,” Christensen added.
Ensure risk mitigation with regulatory compliance
Proposing that regulated banks issue stablecoins collateralized by central bank deposits is an effective approach to leverage the benefits of digital currencies while mitigating financial risks, making stablecoins a viable alternative to CBDCs, according to Concordium’s Christensen. Create.
“It is inevitable that stablecoins will grow into mainstream use in the coming years, given their solutions for cross-border transactions and ensuring legal frameworks.”
Christensen analyzes existing concerns about the stability and volatility of stablecoins, arguing that they should be seen as an opportunity for innovation. Therefore, to mitigate the risks associated with stablecoins, it is important to use a regulatory framework that ensures compliance with AML and KYC standards and provides transparent reserve management.
“By meeting regulatory expectations, stablecoin issuers can increase investor confidence by creating a sense of security among users and mitigating potential risks,” he said.
EUROe, recently launched by Concordium, represents an excellent example of being overcollateralized, fully backed by fiat, issued by a licensed operator and held by a trusted custodian.
The adoption of stablecoins is increasing as regulatory frameworks evolve around the world. Rated as above $120 billion In the fourth quarter of last year, stablecoins became the most widely adopted class of tokenized RWAs, and this trend is expected to continue, driven by increased institutional interest and user demand for more stable digital currencies.
“It is clear that in countries struggling with unstable currencies or stringent capital controls, stablecoins are emerging as a powerful alternative for preserving value and facilitating transactions. In those regions, stablecoins are not just another financial instrument, but a necessary tool for financial stability and accessibility,” Concordium’s Christensen told MPost. “Adopting stablecoins in this context is more than just a possibility. This is the path to financial inclusion and stability. For this reason, stablecoins will likely see greater acceptance in the future.”
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About the author
Alisa is a reporter for Metaverse Post. She focuses on everything related to investing, AI, metaverse, and Web3. Alisa holds a degree in Art Business and her expertise lies in the fields of art and technology. She developed a passion for journalism through her work with VCs, notable cryptocurrency projects, and science writing. You can contact us at (email protected).
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alice davidson
Alisa is a reporter for Metaverse Post. She focuses on everything related to investing, AI, metaverse, and Web3. Alisa holds a degree in Art Business and her expertise lies in the fields of art and technology. She developed a passion for journalism through her work with VCs, notable cryptocurrency projects, and science writing. You can contact us at (email protected).
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