The stablecoin market is booming

As the ecosystem evolves, crypto exchanges are increasingly creating their own stablecoins. Binance, OKEx, and others are joining the likes of Circle and Coinbase with their own proprietary offerings. A new report from Binance, The Evolution of Stablecoins, chronicles these changes in the market, finding that stablecoins are quickly eating into the dominance of Bitcoin and Ethereum pairs, and have grown to represent 60 percent of traded volume, up from just 35 percent this time last year.

Most of this volume is traded in Tether, which despite price fluctuations and transparency concerns, remains technically superior with the highest liquidity, smallest spreads, and lowest time between fills. However, exchange coins are commanding a bigger slice of the market, and even though the Gemini Dollar lost "nearly half of its market capitalization in the first four months of 2019", other exchange-backed coins have crept ahead, with Coinbase’s $USDC seeing the biggest gains in terms of circulating supply.

Exchange money

Just three weeks after releasing the report, Binance CEO CZ revealed on Twitter that the exchange will be releasing its own pound-backed stablecoin—$BGBP.

Until this point, the platform has been prolific in adding other stablecoins, welcoming a total of five dollar-backed coins onto the exchange. But sterling, which is thought to be subject to more stringent regulatory requirements, has remained absent from the exchange.

With only £200 minted so far, Binance’s pound is still in the testing phase, but will provide an alternative to existing sterling-backed stablecoins like TrueGBP, launched last year by TrustToken, and eToro’s GBP, both of which remain in the early phases of their development and are not yet traded widely.

Following the lead of Binance, Chinese exchange OKEx has launched its own dollar-pegged ERC-20 stablecoin — USDK — which is backed by US-licensed trust company Prime Trust. It will compete against existing stablecoins TrueUSD, Gemini dollar, USDC and Paxos on the exchange.

Gateway coins

Though stablecoins continue to assert themselves on retail exchanges, they also fulfill an important role in OTC markets, providing the liquidity needed for larger players to enter the market without slippage.

In this way, the coins represent a convenient and secure gateway into cryptocurrency. It’s for this reason that legacy financial firms developing decentralized financial infrastructure have now started to develop their own stablecoins as a way of attracting customers to their exchanges.

Swiss stock exchange SIX, which plans to launch a blockchain-powered token exchange in the second half of 2019, has recently announced that it is also developing a fiat-backed token. And while it is not yet clear whether the coin is for public or private use, it could be used to help facilitate trading tasks on the blockchain with atomic swaps.

But even as legacy players prepare to introduce new rivals for the likes of Tether, a larger threat to the stablecoin ecosystem is looming on the horizon.

Binance’s report and Brave New Coin’s own report on the state of the stablecoin ecosystem predict a new wave of big tech challengers with deeper pockets, bigger audiences, and lower levels of risk aversion than traditional financial companies.

The ambitious and ambiguous Project Libra from Facebook — which is said to involve a stablecoin, physical ATMs and $10,000,000 nodes — is expected to launch soon. Samsung is reported to be developing its own asset for the company’s Ethereum-based blockchain mainnet, which could be used as a token within the company’s payment app, Samsung Pay.

Still, it remains uncertain how much integration these projects will offer with the existing cryptocurrency ecosystem, and what kind of welcome they will receive—some suggest that by issuing stablecoins, tech companies and exchanges will become the next generation of banks, representing a departure from the initial idea of ‘disintermediation’ that bitcoin was built around, and putting the ecosystem at increased risk of centralization.

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