Just like has already happened with the US Dollar and the Euro, among others, Australia is about to get its first Aussie-backed stablecoin.
This will be made possible by a partnership between Bit Trade, one of the oldest cryptocurrency exchanges in Australia, and blockchain employment platform, Emparta. The two firms will collaborate in designing and launching the stablecoin which is expected to be launched next year.
According to the managing director of Bit Trade, Jonathon Miller, the AUD-backed stablecoin will fill a gap that exists in the market as it will act as a buffer against the wild fluctuations associated with cryptocurrencies.
“Stablecoins solve one of the principal issues that may drive investors seeking steady returns and merchants that currently accept traditional currency away from digital currencies: volatility,” wrote Miller in a statement. “We believe that stablecoins will boost trust, accelerate wide-spread adoption, and could function as the backbone of blockchain-based financial applications, especially here in Australia given the favourable regulatory environment.”
The two firms are currently working on a prototype which will be completed in a period of a little over a month. Per Emparta, full redeemability on demand will be one of the key differences that will exist between the AUD-backed stable coin and the world’s best known stable coin, Tether. Emparta also revealed in a Medium blog post that the stablecoin’s initial treasury will be located in the continent-cum-country.
“The first treasury will be based in Australia to support the first partner platforms – Bit Trade and Emparta Payments – and deliver the first Australian Dollar backed stablecoin,” wrote Emparta.
The AUD-backed stablecoin comes less than a fortnight since Gemini, a cryptocurrency exchange started by the Winklevoss twins announced a USD-backed stablecoin. While making the announcement Gemini made it clear that it was aiming to supplant Tether by offering the very qualityTether has been accused of lacking – a ‘trusted and regulated digital representation of the U.S. dollar on the blockchain’.
However, stablecoins have not been greeted warmly in all quarters despite serving as a bridge between fiat currencies and cryptocurrencies. For instance, soon after the announcement by Gemini, Barry Eichengreen, a professor of economics at the University of California, Berkeley, questioned the viability of stablecoins.
According to Eichengreen, stablecoins which are fully collateralized involve a great deal of expense for the issuing firm since every unit of the stablecoin has to be backed by an equivalent of the asset that it’s pegged to. The semi-collateralized ones, on the other hand, are prone to the equivalent of a bank deposit run in the event of loss of faith and trust in the issuing institution.
Despite these arguments, it is highly unlikely that the AUD-backed stablecoin by Bit Trade and Emparta will be the last one the crypto world will ever hear of.