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Smart Valor addresses the problem of cryptocurrency volatility

Bitcoin and American dollar bills

Pegging cryptocurrencies to traditional currencies is seen by some as the response to price volatility.

(Keystone)

Cryptoasset's trading platform Smart Valor plans to launch a new cryptocurrency anchored to the Swiss franc. The CHF t coin will become part of a growing list of so-called "stable currencies" designed to dampen the enormous fluctuations in cryptocurrency prices, such as bitcoin, which limits their daily use.

Smart Valor said today that it is in talks with Swiss banks and cryptocurrency exchanges to issue CHFt. Having a network of financial institutions that draws a supply of coins will provide insurance in case one of them goes out, said the company based in Zug.

The company's platform allows people to trade a wide range of financial assets that have been hand-rolled digitally. The purpose of this structure is to "democratize" finance by making it possible to trade instruments without the need to go through the established financial system.

But the use of cryptographs carries a significant risk of volatility. The activity class of young people is subject to strong increases and decreases in value when investors flock all at once or when tokens override indulge in large-scale sell-offs.

Allaying fears

This volatility makes the type of bitcoin an unsuitable means of making daily payments. It could also prevent traders from moving from the established financial system to the new world of encryption. Olga Feldmeier, CEO of Smart Valor, believes that CHFt will help to allay fears of volatility and encourage more people to enter the so-called "coin economy".

"Stable money is not a prerequisite [to using Smart Valor’s platform]but instead it will be a sort of postcombustor, fueling mass adoption by investors, since many people will appreciate a stable currency behind their activities in the digital world, "he told swissinfo.ch.

"Over 50 million people already use bitcoins, and that number grows every day, and at the same time, people have bought many more coins because they want to mitigate part of the volatility and for investment purposes. , but important, the choice of people has ".

CHFt would not be the first stable currency in any way: there are currently dozens of similar projects all over the world and others in the pipeline. At least three of these Swiss projects are anchored to the franc (see box below).

New exchange

Smart Valor does not have a specific deadline for when CHFt will be operational. The company, which has recently obtained Swiss regulatory approval as a financial intermediary, says it will eventually issue the currency itself, but first must clarify further regulatory obstacles.

Linked to this point is the decision of Smart Valor to set up a branch in Liechtenstein, a jurisdiction seen by many as even more friendly towards cryptocurrencies than the "Crypto Nation" Switzerland. The regulatory authority of Liechtenstein has given permission to manage a cryptographic exchange for utility and payment tokens.

The platform requested a Liechtenstein banking license, as well as communications for various licenses in Switzerland. Smart Valor is also seeking the approval of the Swiss authorities to launch an initial currency offering a mass investment scheme outside Switzerland.

Stable coins

The first bitcoin transaction in 2010 saw two pizzas purchased for 10,000 bitcoins. Last December, 10,000 bitcoins were worth $ 200 million (CHF200 million), but the price fell a few weeks later to $ 65 million. This volatility restrains the mass adoption of cryptocurrencies.

The Holy Grail is finding a cryptocurrency that retains its value to the same extent as traditional currencies. According to experts, there are more than 100 projects around the world trying to achieve this goal. They can be divided into three categories:

The first includes cryptocurrencies that are anchored to traditional currencies, including CHFt, which follows the Swiss franc. At the start of this year, Scenic Swisscoast has launched a private currency linked to the franc that can only be spent using blockchain services. Alprockz also has a frank style project called ROCKZ, while Swiss Longevity Holding plans to launch a stable currency called SWIS.

Other stable currencies are linked to physical assets, such as oil or metals. In February, Venezuela created the Petro which is connected to the country's mineral reserves. In Switzerland, Tiberius' currency is supported by a series of metals.

The third option is to use algorithms that automatically alter the supply of a stable currency once inflated or deflated in value. The Swiss project Forctis is developing the ARES token that can be adapted to represent any resource. The stable GenS currency, incorporated in ARES, uses algorithms that keep the value stable.

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