Regulator Selects 4 Platforms to test Stablecoin

Cryptocurrency that you may be familiar with like Bitcoin and Ethereum is not pegged to or backed by any central bank of government currency.  In very simple terms, it is a piece of unique, encrypted code that can be used on ‘blockchain’ technologies, to secure ‘information’ within.

A blockchain is a decentralized, distributed, and public digital ledger used to record transactions across many computers, ensuring the data cannot be altered retroactively. It works by grouping data into blocks, which are securely chained together using cryptography.

A simple example of its use, could be using ‘blockchain’ to purchase a house in seconds, with all transactions/data/information already stored with the blockchain and encrypted with your unique ‘coin’. 

The problem is with no currency backing, prices can vary wildly over days, months and years.

Enter: Stablecoin

The same type of technology as Bitcoin and Ethereum but the price is pegged to the £ or $ or € or precious metals or other commodities.  The clue is in the title; it is stable and will be backed by governments.  e.g. 1 Stablecoing has a face value of £1.

The UK (and the rest of the World no doubt) is working on Stablecoin to hold and record data, transfer data in encrypted manner at speed and with total security, e.g. in our house purchase example.  Stablecoin supported believe these cryptocurrencies are critical for bridging “real-world” assets like currencies with digital assets on the blockchain.

FCA Regulation

As part of this push forwards, the FCA has appointed 4 platforms to test the use of stablecoin for:

• Issuance
• Use
• Trading
• Payment

Comment

Think of it, the £, $ and € are already ‘Fiat’ currencies, i.e., they are not backed by equivalent Gold Bullion reserves anymore, they are backed by our trust in the Government and Central Bank, they are simple a ‘promise to pay the bearer the sum of twenty pounds sterling’  i.e. silver (fat chance).

Stablecoin as we see it is another way to speed up and unblock slow supply, development, and trade chains.