Foreign media: Stabilizing the coin, go away! Here comes the new token!

Reported by Reference News Network on May 16thThe Bloomberg News website recently published an article titled "Stable Coin Goes Away, A New Token Comes" by Andy Mukherjee. The article is compiled as follows

The digital currency industry is now divided into two camps. Traditional thinkers hope that public institutions will continue to be responsible for providing a safe trading medium for the public to solve each other's debt problems. They said that otherwise, private funds could become as unreliable as the wildcat banking business before the American Civil War, when a bank in Tennessee issued currency at a 20% discount in Philadelphia.

On the other hand, experimentalists believe that the excitement surrounding the Central Bank Digital Currency (CBDC) is a momentary frenzy - a bit like the "parachute pants" of the 1980s. Once a country has established an accounting unit, it can stand aside and allow non-state-owned sectors to use their own stable currency, which is an electronic representation linked to the US dollar, euro, yen, or pound sterling.

At a time when there is no solution to this public-private conflict, there is now a third factor - deposit tokens. The germ of this idea has recently been validated as part of the "Guardian Plan", a collaboration between the Singapore Central Bank and the financial industry aimed at exploring the economic potential of asset tokenization. JPMorgan Chase turned Singapore dollar deposits into digital assets, set them to only trade with some known wallet addresses, and proved that institutionalized security can be achieved on the public blockchain.

Since 90% of all circulating funds are bank deposits, the possibility of all these funds supporting "smart contracts" - self executing software code that initiates currency value exchange when certain conditions are met - is a significant matter.

Take real estate transactions as an example. It is quite common to use a custody account when transferring property rights (i.e. when the property changes hands). Less common, but not completely extinct, is the situation where lawyers who operate custody accounts run away with their payments. Now let's assume that the purchase price is withdrawn from the deposit account and placed in a digital savings bank. The seller has a key that can only be used when selling the apartment. This is a smart contract. If the transaction fails, you can break this piggy bank.

Let CBDC and stable currency - both retail products - compete for people's attention. The destroyer behind the scenes may actually be a lackluster deposit. Deposits are very useful. The risk that one party may not be able to repay the other party's debts in trade is a nightmare of losing $2.2 trillion per day in cross-border payments. Blockchain has an atomic effect: both parties to a transaction either succeed together or fail together. Digital deposits may eliminate settlement risks. According to a report jointly released by Aowei Consulting and Onyx Digital Platform, a subsidiary of JPMorgan Chase, consumers will receive efficiency gains as costs decrease:

In 2020, the cost of cross-border transfers of $23.5 trillion was $120 billion, and settlement took an average of 2-3 days. Although we estimate that multi currency CBDC can reduce cross-border transfer costs by 80% to approximately $20 billion, deposit tokens can achieve similar benefits by reducing transaction fees, settlement time, and counterparty risk, as well as allowing for more direct fund transfers.

Most stable currencies maintain their fixed value with a 1:1 financial support. Each dollar token (at least in theory) made by TEDA or Sykel Internet Finance Company can be redeemed by its issuer by paying US treasury bond bonds or similar high-quality liquid assets. But not everyone believes that they are the future of money. Agustin Carstens, General Manager of the Bank for International Settlements, said, "When everything goes smoothly, most stable currency transactions are close to face value. But not always everything goes smoothly

In contrast, CBDC carries the solemn commitment of a country's highest banknote printing agency to pay at face value.

Tokenized deposits are in between. This is the power of the issuing bank, so it is not truly sovereign debt. However, most people still view it as sovereign debt. This is because the careful protection of deposit insurance and bank regulation not only gives customers confidence to store funds in corresponding financial institutions, but also will continue to be effective. Unlike stable currency, token deposits do not require 1:1 financial support. This may be a good thing. Providing the world's limited security assets for more productive purposes without compensation is more economically efficient than stuffing them into the gears of grey blockchain trading.

In the ideal world of traditional thinkers, tokenized deposits and CBDC may make stable currency redundant. Carstens said that it can be imagined that in the future, commercial bank deposits and central bank funds will be placed on a comprehensive platform in the same configurable form - a unified general ledger.

However, at present, experimentalists are winning. Yinmen Capital Company has closed the Yinmen Trading Network (SEN), clearing an important obstacle for institutional investors to exchange US dollars for digital tokens. With the death of SEN, stable currency is likely to become more ubiquitous among traders, "said blockchain analysis company Keke." People are not depositing dollars on exchanges, but rather depositing them with stable currency issuers, receiving stable currency, and then transferring them to trading houses