While bitcoin remains too strong to be a competition for any cryptocurrency, the stablecoin Tether has been targeted by more than sixty stablecoins. This time, the warning is circulated by non other than the widely known cryptocurrency exchange, Binance. After disclosing details about launching a stablecoin, Binance GBP (BGBP), within two months, Wei Zhou, a chief financial officer at Binance, explicitly alarmed Tether to get prepared for some serious competition. Binance, world’s largest cryptocurrency exchange, is indulged in preparations to launch a stablecoin that will be 100% pegged to the British pound.
Although Zhou confirmed the project, the founder and CEO of Binance, Changpeng Zhao had admitted ongoing development related to BGBP a lot earlier. On Twitter, when a user stood dubious in his post regarding Binance releasing a stablecoin, Zhao clarified that the project was in the testing phase as only £200 were minted.
This is in testing phase still, only £200 minted so far. Slowly, but surely…
— CZ Binance (@cz_binance) June 3, 2019
At the moment, among the less volatile digital currencies, Tether is considered to be the king of all. This fact is even endorsed by the largest crypto exchange who is now devising strategies prior to the launch of BGBP by openly challenging Tether. According to Paolo Ardoino, chief technology officer at Bitfinex, Tether alone accounts for 98.7% of the stablecoin trading volume. A report by Diar, while confirming Tether’s dominance in the stablecoin market, revealed that Tether’s on-chain transaction volume achieved a new all-time high in 2019. Furthermore, the report suggests that Tether remains popular in Asian countries especially China where the stablecoin is extensively used. The report reads:
On-chain data shows Tether movements hitting a new all-time-high for 2Q19 with one month left on the calendar for the period. What is most striking, however, is the volume coming in and out of Chinese exchanges dwarfs western and global trading venues and accounts for more than half of the total transaction value of known parties
Recently, Zhou stated that Tether accounted for 50% of stablecoin volume on Binance. Aiming to substitute most of this trading volume with the help of BGBP, Zhou elaborated that, unlike Tether that is only 74% backed with by cash and securities, Binance’s stablecoin will be fully backed.
As stablecoins are pegged to some other currency or security, the details about banks where the reserves are kept become very important for investors. Zhou suggested that the company will be unveiling details about the bank they collaborate with after BGBP is launched. Kyle Samani, co-founder of Austin, after believing in the capability of BGBP to threaten Tether, emphasizes Binance to make sure that their currency is fully backed and easily redeemable, something that Tether failed at. He suggested:
Binance could also work with an auditor to offer strong assurances that the tokens are fully backed and easily redeemable. Considering the recent events with Tether, those assurances would be a compelling reason to use Binance’s stablecoin.
In addition to its own stablecoin, Binance is also planning to introduce coins pegged to other currencies except for US dollars. For that, the company is looking for partners who are interested in utilizing Binance’s own blockchain, Binance Chain ledger. Recently, a startup, Stably launched a stablecoin, USDS, on Binance’s Chain. Zhou believes that the US dollar isn’t used all over the world so the stablecoins pegged to some other currencies should also be offered to soothe people belonging to different countries. In this regard, his exact words were:
From the users’ perspective, only certain portions of the world use the dollar. Other users use other currencies, and we feel it should be reflected in stablecoins as well.
Nowadays, crypto exchanges launching a stablecoin is very common. A few months ago, Coinsquare, a cryptocurrency exchange, launched a stablecoin pegged to the Canadian dollar in the ratio 1:1. Even Binance had previously launched a stablecoin known as Binance Coin (BNB) that is now ranked as the seventh largest market cap market cap in the crypto market. The season of launching stablecoins has been so hot that giants such as JP Morgan have already launched their stablecoins while Facebook is in the process and expected soon to join the crypto space with its crypto project.
Unlike bitcoin or Ethereum, stablecoins track some other stable asset like gold or the U.S. dollar. That’s why these digital currencies aren’t as volatile as bitcoin and, therefore, are preferred by majority. Stablecoins are expected to bridge people with the crypto space as they are considered ideal for people not fond of taking high risks i.e high fluctuations or variations in prices. In the future, for crypto enthusiasts, it will be of interest to see how Binance manages to increase mass adoption while simultaneously managing to dethrone Tether.