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How Stable is your Stablecoin?

Stablecorp | Jean Desgagne | Feb 3, 2022

How stable is your stablecoin - How Stable is your Stablecoin?

There is no guessing game.  A VCAD is a digital, secure, transferable bank deposit receipt facilitated by the blockchain.

The global stablecoin supply has exploded in 2021, tripling in supply since the start of the year with market cap surpassing USD 100 billion. What was once thought of as a bridge between the fiat and crypto world has increasingly become part of mainstream financial transactions with use cases ranging from access to crypto markets and a safe-haven asset to a means of payment for goods and services, accessing yield in digital markets, and remittances.

Stablecoins enjoy the benefits of blockchain-based assets without the volatility of traditional cryptocurrencies. The most popular stablecoins are ‘backed’ or ‘tethered’ to a fiat currency thus they achieve their ‘stability’ via fiat collateral held in reserve. These reserves are typically stored with a bank or some other third-party requiring management by a central authority, traditionally a private company.  The whole principle behind the stability of this type of token is that you expect that the collateral held in reserve is equal to the stablecoin tokens that exist and that it is being held by a reliable entity.

See:  Versabank to Launch VCAD, World’s First Bank-issued, Deposit-based Digital Currency

Users of stablecoins should ask themselves: What proof is there that the collateral reserves are actually there? Do they have the value that has been indicated to the market? In what jurisdiction are the reserves held and are they being held by a regulated entity?  Does the entity issuing the stablecoin have the appropriate licenses and are they following appropriate regulations to operate?

Stablecoin-issuing companies seek to provide an element of trust and answers to these questions by providing regular attestations that the stablecoins are fully collateralized by a reserve, often done by a third-party auditor, as well as providing proof of licenses and registration to operate in the jurisdiction in question.  But why not take this another step further?  Rather than a stablecoin being ‘tethered’ or ‘backed’ to a fiat currency or bank deposit, why not create a stablecoin that is an actual bank deposit; a digital representation of a bank deposit?

Stablecorp and VersaBank have partnered together to do just that: create a token, VCAD, that differs from the traditional stablecoin model in that it is a digital representation of a deposit at an A-rated Canadian Schedule I Bank.

Schedule I banks are fully audited, well capitalized, and highly regulated by one of the world’s most respected financial regulators.  In other words, you do not have to worry about the value of your stablecoin, whether it is “backed” in some offshore jurisdiction beyond Canadian (or any) regulation, or whether you can redeem it today for fiat.

See:  A Visual Explanation of Algorithmic Stablecoins

There is no guessing game.  A VCAD is a digital, secure, transferable bank deposit receipt facilitated by the blockchain.  It has all the features of a cryptocurrency but addresses the two major shortcomings of the traditional cryptocurrency market – volatility and security. For all intents and purposes, it will function as the ‘stablest of stablecoins’ offering the highest level of stability and security amongst all digital currencies in the market today.

Author Bio:

Jean Desgagne - How Stable is your Stablecoin?Jean Desgagne is CEO of Canada Stablecorp.  He is also a Corporate Director, Advisor, and Leader.  He brings to his role deep C-suite and Board experience within large multinational financial institutions, exchanges & market infrastructures - in risk, operations, technology, finance and innovation.  Current and past Board Member for regulated financial companies, government agencies, industry associations, universities and not-for-profit organizations.  Advisor to several startups in the blockchain, Fintech, platform and data spaces.

 


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