BitMEX co-founder Arthur Hayes proposes Bitcoin-based stablecoin

by · March 9, 2023

As US regulators increasingly scrutinize stablecoins, the community continues to present new ideas for stablecoins independent of the US dollar.

Arthur Hayes, co-founder and former CEO of BitMEX cryptocurrency exchange, has proposed creating a new stablecoin with a value tied to the sum of $1 worth of Bitcoin (BTC) and a reverse perpetual swap of BTC to USD. He outlined the idea of ​​the potential Satoshi Nakamoto Dollar (NUSD), or NakaDollar, in a blog post titled “Dust on Crust” on March 8.

Unlike major reserve-backed US dollar-pegged stablecoins such as Tether (USDT) and USD Coin (USDC), the proposed NakaDollar will not depend on any USD reserves, but solely on derivatives exchanges that list floating inverse perpetual swaps, Hayes said.

The proposed stablecoin will be explicitly based on a set of short BTC positions and USD inverse perpetual swaps, maintaining its 1:1 peg to the US dollar via mathematical transactions between the new Decentralized Autonomous Organization (DAO) – NakaDAO – authorized participants and derivatives exchanges.

The process of creating the NakaDollar stablecoin will be completely free from movements of the USD, which require the services of banks, Hayes said. He still noted that the proposed NUSD stablecoin would not be decentralized, adding:

“The points of failure in the NakaDollar solution will be centralized crypto derivatives exchanges. I excluded decentralized derivatives exchanges because they are not nearly as liquid as their centralized counterparts […]”

The news comes as the owner of Silvergate Bank, a major crypto-focused bank in the US, is closing operations and winding down amid the ongoing market downturn. The shutdown came quickly after the New York Department of Financial Services abruptly ordered Paxos Trust Company to stop issuing Binance USD (BUSD), one of the largest US dollar-pegged stablecoins on the market. As previously reported, Paxos had deposits in several banks, including Silvergate and Signature.

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Hayes is not alone in considering USD-independent stablecoins amid ongoing pressure from regulators. In February, Binance CEO Changpeng Zhao suggested that the cryptocurrency industry is likely to move to other fiat currencies as a base for stablecoins, including the euro, yen or Singapore dollar.