London Blockchain Conference 2023: Stablecoins and not-so-stablecoins

After lunch on Day 1 of the London Blockchain Conference (LBC) 2023, the business scene hosted a discussion on the merits and future of stablecoins in the digital asset ecosystem as well as the wider economy.

In addition to a busy day of blockchain talks and networking, attendees at LBC 2023 were treated to an afternoon panel titled “Stablecoins and digital currency”, where three industry insiders gave their two cents on the sometimes controversial topic of stablecoins.

“Stablecoins are primarily an infrastructure project, it can still be profitable to operate, but you have to work through the first phase of being an infrastructure project,” said Bernhard Müller, CEO and Chairman of Centi Ltd., a company that recently issued the first Swiss Franc Stablecoin.

Müller spoke from experience about the regulatory hurdles, depending on the jurisdiction, that must be jumped through to get stablecoins off the ground. Fortunately for Centi, “Regulatory clarity was established fairly quickly,” Müller said. However, it is not always easy, as explained by fellow panelist Niels van den Bergh, CEO of mintBlue:

“There’s a lot of regulation involved in getting into stablecoin … it depends on timing and opportunity.”

van den Bergh said that once you get past the regulatory barrier to entry, stablecoins can provide “a whole new world” of opportunities, especially for a tech startup.

In this regard, he talked about fiat-backed stablecoins, such as Tether, which are (apparently) backed 1:1 by the USD. But the panel touched on the more divisive topic of algorithmic stablecoins.

The spread of this topic drew laughter from the packed hall of attendees and broad agreement from the speakers regarding the merits of algorithmic stablecoins: the verdict was that they were essentially not stable.

Algorithmic stablecoins often do not have reserve funds, which distinguishes them from traditional stablecoins. Instead, they control the supply through smart contracts and an algorithm, which makes them particularly vulnerable in a crisis.

“Algorithmic stablecoins can work in theory until it really matters to be stable. When there is a market downturn, in these cases, they historically fail,” Müller explained.

The panel’s third speaker, Tokenized CEO James Belding, went further and suggested that algorithmic stablecoins are “doomed to fail.”

However, Belding was more optimistic about the future of non-algorithmic stablecoins, saying, “I think (stablecoin) is going to be quickly picked up by the big financial players … it’s going to be taken more seriously soon, and they will be some big changes.”

Some of these “major financial players” could be central banks, which would most likely point to central bank digital currencies (CBDCs): “Stablecoins are a very exciting proof of concept and a stepping stone towards CBCDs,” suggested Belding.

Asked whether a company like Centi, which produces a Swiss franc stablecoin, could develop into a de facto CBDC or ‘federal reserve’, Müller replied: “As a private company no, but the technology can certainly be used.”

Jokes and big dreams aside, a key theme discussed at the panel was trust and accountability, which panelists agreed stablecoins could provide if done right, transparently and within the law (here’s looking at you, Tether).

“A stablecoin is on a public ledger, it’s publicly verifiable and anyone can check,” Müller said. Belding added: “It removes black boxes and potential fraud … it fundamentally simplifies things from an accountability side.”

At least this is the theory, and from the panelists’ consent and the audience’s warm reception of the conversation, there is enough faith in stablecoin’s ideas and possibilities to carry the technology to greater uptake and application.

See: Swiss Franc Stablecoin Built by Centi on BSV

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