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Several months ago, Gemini's cryptic exchange made waves when he announced that, with the permission of the New York Department of Financial Services (NYDFS), he had created a "cryptocurrency" of cryptocurrency in dollars that would provide traders and institutions a "regulated" alternative to the tether (USDT), which has often been the subject of controversy despite having a multi-billion dollar market capitalization and the second average daily trading volume higher than any cryptocurrency.
On the same day, the colleague Paxos Trust Company, New York's New York colleague, announced that he had also received NYDFS approval for the launch of a stablecoin, called Paxos Standard (PAX). Not surprisingly, PAX received much less initial attention than the Gemini Dollar (GUSD), since the latter had the advantage of a Winklevoss media blitz, while the former – although a significant player in the professional encryption market – did not it was well known among retail investors.
The Tether Quandary
David Wells, General Manager of Paxos, told CCN that the company began to seriously discuss the launch of a stablecoin at the beginning of 2018 after – as Gemini – identifying the market demand for a cryptocurrency supported by make that it operated within a solid regulatory framework, such as an alternative to the tether.
Tether dominated the fiat proxy landscape for a long time, representing 98 percent or more of the volume of daily stablecoin exchanges. The cryptographic token, whose market capitalization currently stands at $ 1.8 billion and once approached $ 3 billion, is considered by some to be a systemic risk for the encrypted market, given that it plays such an important role in the discovery of bitcoin prices. and practically in all other cryptocurrencies derive their values from the bitcoin.
The USDT token is perhaps the most controversial cryptocurrency asset, surpassing even perennial critical points such as ripple (XRP), EOS, IOTA, tron (TRX), and any initial token tokens (ICO) of John McAfee discarded this week. Investors, nocciolinists and academics have dusted off if Tether and Crypto exchange Bitfinex – the two companies share a management team – are operating a fractional reserve and use unprotected tokens to inflate the price of the bitcoin and prevent it from falling below the levels of key support.
Both the Commodity Futures Trading Commission (CFTC) and the Department of Justice have opened investigations into whether Tether and Bitfinex have engaged in illegal activities, however, at the time of writing this document, no enforcement actions have been made public.
Stablecoin alternatives emerge
NYDFS – the architect of BitLicense – oversees what is probably the most rigorous regulatory framework in the United States for cryptocurrency companies, and Wells said there were "a lot of back and forth" and training sessions before that the agency gave them the green light to start digitizing dollars. "They saw the need for a regulated stabilizer in the market," he said.
But what makes these "token" more "regulated"? Well, first, broadcasters like Paxos and Gemini need to engage in more robust recording and monitoring. For another, they must adopt "risk-based controls" to prevent tokens being used as money laundering tools or other illegal practices, which generally imply that the issuing account is able to freeze user balances and revoke token associated with criminal activities.
Of course, Gemini and Paxos are not the only companies trying to unseat USDT. TrustToken's TrueUSD (TUSD), launched at the start of this year, reached the market ceiling at $ 182 million, making it the second largest stablecoin at the time of writing. USD Coin (USDC), whose announcement came shortly after GUSD and PAX, ranks third with a valuation of $ 169 million.
There are also algorithmic or seigniorial stablecoins such as Dai and Basis, which are not exclusively supported by fiat reserves but may be fully or partially guaranteed by other activities. Smart contracts that regulate these tokens are programmed to automatically control supply based on market demand, increasing supply when demand threatens to push the price above the peg and remove tokens from circulation when verify the opposite.
PAX, USD jockey for the Stablecoin throne
Although TrueUSD maintains an initial lead, it seems increasingly that the quest to replace the cable is becoming a two-horse race between PAX and USDC, which are rapidly gaining ground in TUSD and have therefore left GUSD in the dust.
The USD currency, unlike the Paxos standard, is backed by the biggest family name in the crypt. Coinbase, together with colleague bitcoin unicorn Circle, is a co-broadcaster of USDC, and both are founding members of the CENTER consortium, which governs the development of USDC and future stablecoin offerings. As a result, USDC is quoted directly on the Coinbase platform, allowing tens of millions of users to easily convert between tokens and fiat without having to open new accounts.
But while the cable continues to dominate the trading on stablecoin, PAX is the first leader among its new competitors – USDC included – regularly exceeds its peers in both daily trading volume and in terms of speed, or the relationship between its lap of daily business and market capitalization.
"An element of differentiation for us is the fact that we have had a global presence for the five years we have been in operation," explained Wells, noting that the encrypted exchange of the company – it bit – has offices both in New York that in Singapore. He said that relations with market makers and international exchanges, together with the company's OTC help desk, helped PAX to start up the network and to achieve rapid adoption on global locations.
Obviously, the stablecoins carry much more than just trading, and the issuers have highlighted a number of potential cases of use of these tokens, ranging from the improvement of the efficiency of cross-border payments denominated in line to make more consistent the fees for decentralized applications (dApp). However, Wells said that, at least at this time, PAX – like other stablecoins – is used primarily by crypto traders, both on conventional cryptocurrency platforms and on the company's over-the-counter (OTC) trading desk.
"It's just a good alternative to the fiat," said Wells, noting that the stablecoins allow traders to quickly shift funds between the stock markets without undergoing price volatility, even temporarily. "We have heard from many traders who trade in different places that only prefer the PAX to cash in."
The gap has narrowed over the last two weeks, with several developments giving the USC a huge boost. First, Binance – the world's largest cryptographic exchange – has listed a pair of USDC / BTC trading, providing the token with a significant increase in liquidity. Secondly, the cryptographic exchange Poloniex – whose parent company is Circle – has become the first major trading platform to create a bitcoin cash pre-fork futures market. Significantly, Poloniex listed the pre-fork tokens against the USDC, but not the halter, forcing traders to use the Circle stablecoin if they wanted to use the USD – or at least a fiat proxy – to bet on the result of the BCH fork.
Even so, PAX maintains a considerable advantage. Its $ 305 million in seven-day trading volume is more than 140 percent larger than $ 125 million of the USD, as well as 10 percent more than the more established $ 277 million of TUSDs.
However, these statistics do not just show that PAX has reached an advantage over its peers. They also show how much work awaits us before PAX or any other stablecoin upstart becomes a credible threat to the cable, whose $ 25 billion weekly volume remains more than 30 times larger than the weekly volume of PAX, USDC, GUSD and TUSD – combined.
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