The recent formation of the World Stablecoin Association in Switzerland was done with the goal of creating a united front for the sector to tackle regulatory concerns and drive collaboration. Stablecoins are becoming an increasingly important, widely used medium of exchange in the cryptocurrency community, with industry leaders such as Tether (USDT) and USD Coin (USDC) enjoying immense success in 2020.
Tether hit a milestone toward the end of July, surpassing $10 billion in market capitalization as fiat currency continues to be converted into the stablecoin. Meanwhile, USDC celebrated breaking the $1 billion market cap threshold at the beginning of July, just a few months shy of its second birthday.
The success of these projects is a real indicator of the popularity of stablecoins and their utility in the cryptocurrency space, yet up until now, there was no organization to bring these stablecoins together to collaborate. The WSA is still in its infancy, having just been formed, but it is actively in talks with Tether, USDC, Dai and HUSD, hoping to bring these projects on board by the end of 2020.
A number of projects have already reportedly become members of the WSA, such as the Canadian dollar-pegged QCAD as well as decentralized finance protocol Ren, which is backed by Polychain Capital. Additionally, the Brazillian Digital Token (BRZ), Crypto BRL (CBRL), Peg Network, QCash (QC), Stably, USDK and Digitalbits (XDB) are also believed to have joined the initiative.
A united front
While some of the cryptocurrency ecosystem’s biggest projects come as the result of open-source software development, direct collaboration between industry participants that are offering similar services is not widely seen. Stablecoins peg to a certain underlying fiat currency or physical asset, and some of these are pegged to the very same asset, which puts them in direct competition. While this competition exists, the creation of the WSA seems to be getting some positive reactions from stablecoin operators and industry experts alike.
Cointelegraph spoke to Emin Gün Sirer — computer scientist, professor at Cornell University and CEO of Ava Labs — to learn the particular challenges facing stablecoins and their operators and if the WSA could potentially provide the support needed to overcome them. He said the creation of an association for stablecoins is a welcome addition to the industry in light of three major challenges:
“On the technical side, we need established best practices for security, auditing, and monitoring for projects to follow. On the regulatory side, they need to convince lawmakers to enact new processes for compliance in the newly emerging DeFi world. And finally, adoption and user education are key to getting stablecoins to reach the next level.”
Gün Sirer believes the amalgamation of these different operators could spearhead the development and proliferation of stablecoins around the world: “It’s fantastic to see the WSA bring together both fiat-pegged and algorithmic stablecoins together under the same structure.” He went on to add: “This united front can help address the technical and regulatory challenges ahead, and thus help expand adoption.”
Cointelegraph also spoke with Roberto Durscki, COO of Stablecorp — the organization behind the launch and maintenance of QCAD. Durscki highlighted the opportunities for a stablecoin alliance and how it has the potential to benefit the overall crypto ecosystem by sharing compliance insights and establishing a consensus around best practices:
“A token per se doesn’t create a Stablecoin, a lot of work goes on the PPs (policies and procedures) as well as overall management of the coin for a reliable and effective financial tool. We believe an alliance/consortium/association of some kind, bringing the best projects globally together, could help set minimum compliance standards as well as help new projects to build those capabilities.”
Another potential upside is the establishment of meaningful partnerships between different stablecoin operators. While the industry has probably been guilty of an individualistic mindset, Durscki sees value in forming teams: “Stablecoins, like any other projects, require solid partnerships to thrive. Especially on compliance, legal, accounting and tech.” Additionally, given that stablecoins offer an easy medium of exchange between cryptocurrencies, they could also operate well as trading pairs between each other:
“A lot of a stablecoin value is related to its liquidity and ease of trade versus other assets (including other Stablecoins). We believe that an alliance would speed up and facilitate the technical integration among Stablecoins.”
The WSA’s launch comes at a time when stablecoins are enjoying immense success. Tether is close to becoming the cryptocurrency with the highest daily transaction volumes in United States dollars, accounting for over $11 billion of the $13.4 billion market capitalization of stablecoins alone, according to crypto data and research firm Messari.