Stablecoins can “revolutionize” the financial industry and avoid the economy falling into a so-called liquidity trap, a report says.
A report from blockchain advisory group, Zexmon Group, following last month’s Jackson Hole Economic Symposium Conference, has focused on the importance of cryptocurrencies, in particular stablecoins.
Stablecoins, such as USDK, are digital assets that are pegged to fiat currencies. The report says they offer a way to strengthen the global economy and overcome a liquidity trap.
Despite launching just three months ago the USDK, created by OKEx sister company OK Link and backed by US-based custody provide Prime Trust, is 100 per cent backed by a currency reserve.
This is in stark contrast to major stablecoin asset, Tether (USDT), which holds a larger share of the stable coin market.
“At present, USDT has an absolute advantage in the stablecoin market. Yet the token’s accidental issuance and burnt, opaque audit, not fully backed by fiat equivalents, etc. have led the market to lose trust in the stablecoin,” the report says.
“Another stablecoin on the market is more trustable – USDK. USDK is a stablecoin powered by blockchain technology and US Licenced Trust Company.
“USDK wins market’s trust by offering a completely transparent background and is fully backed by fiat currency. It fulfils what the market needs in a stablecoin.”
Bank of England
The report describes a speech by Mark Carney, the Governor of the Bank of England at the conference.
“He emphasised that when the interest rate declines in the future, the global dominance of US
dollar increases the risks of liquidity trap and therefore they should be looking to cure the dollar’s spillover effect as long term goal. The only way is to urge stablecoins, such as Libra, to end the USD supremacy dominance and establish a multi-currency reserve system, But Libra must be able to solve its own problems first,” the report says.
“Carney reminded the market that at a low or even zero interest rate environment, the surplus of US dollar might cause people to stock up … forming a liquidity trap.
“To prevent this, stablecoins like Libra can be used to break the USD’s dominance and
establishing a new type of multi-polar reserve system. This shows the mainstream finance
industry sees stablecoin as something far greater than blockchain; instead, they are exploring
how stablecoin can revolutionize the whole finance industry.”