The Truth About Stablecoins | Opinion Piece

The following article is an opinion piece, representing the perspectives and interpretations of the author as a board member of ARYZE BVI Ltd. ARYZE remains committed to providing a platform for a range of voices while ensuring our readers understand the nature of the content they are consuming.

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As Securities & Exchanges Commission head Gary Gensler enforces current US securities laws in an attempt to police and control crypto exchanges Coinbase and Binance, his predecessor Jay Clayton appears to have adopted a more nuanced view of the digital assets sector. Clayton, speaking at a recent Bloomberg investor conference, sought not to second guess his successor – and while he was, for the record, very tough on the then-emerging ICO trend back in 2018 – his viewpoint today on the promise of blockchain-driven innovation is as welcome as it is refreshing, coming as it does from a former regulator. Specifically, Clayton has talked about what he terms “true stablecoins.” He stated the following:

“I am remarkably impressed by the functionality of true … stablecoins. Not the algorithmic stablecoin, not the liquidity transformation stablecoin, but a true [stablecoin] backed by the same thing that we back bank accounts by.”

For ARYZE, we could call this a hallelujah moment! That’s because our company has built exactly what Clayton was referring to – a non-speculative, non-opaque, and non-algorithmic suite of stablecoins with a purpose: to be a programmable form of money, available to all and based exquisitely on…. trust. 

He further suggested that, compared to paper currency, stablecoins provide a far greater capacity for compliance with KYC/AML regulation. And he is absolutely right about that too! 

CBDCs or Central Bank issue digital currencies that may technically fulfill the Clayton definition of a true stablecoin, but will they actually work in practice, tied as they are still to a specific sovereign fiat currency and all the socio-economic baggage that still brings? And then there is the privacy issue – will folks really feel comfortable being de facto surveilled by their government as they go about their daily routine? 

At ARYZE, we think Clayton is spot on – true stablecoins may share the functionality of a CBDC, but they will need to be independent and have even greater utility, especially in the context of supporting cross-border and multi-currency transactions. ARYZE stablecoins are indeed backed over 100% by the “same thing that we back our bank accounts with,” as Clayton put it, except in the case of ARYZE – only better still. 

Better because, as recent bank runs in the US have shown, banks still have a profit motive clouding their judgment and actions – actually, is the money in your bank account properly backed at all? How much of it is really within arms reach? It’s complicated, as we know from the calamitous failure of SVB and others. True stablecoins are not only the ethical alternative to a CBDC, they can be the practical alternative to a bank, a forex trade, and certainly the best and only route to sustainable financial inclusion. Now Mr. Clayton did not say that explicitly, no. But that’s the essence of the argument if you think about it the way we do at ARYZE: solving real problems for real people in an ingenious, inclusive, and forward-looking way. Regulators should get onboard since we are doing the job for them as we go!

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