Stablecoins May Not Be Popular in New Zealand, But They are Still Blockchain’s #1 Use Case, believes Concordium’s Lars Seier Christensen
In Brief
Concordium Founder Lars Seier Christensen believes that stablecoins are most important use case for blockchain, and will be embraced further.
In a recent statement, New Zealand’s Central Bank governor Adrian Orr declared that “stablecoins are not stable,” questioning stablecoins’ very purpose, which came as a surprising contrast to the number of global governments looking to implement them.
The Terra-Luna scandal makes a notable case study in favor of the banking authority’s argument, but as the industry evolves and the marketplace matures, such statements might distract from both the potential and the real-world applications stablecoins are already taking on.
There are examples of stablecoins taking on more volatility than their name would suggest, but as with any new technology—including cryptocurrencies—there are growing pains, but not insurmountable ones.
In a conversation with the Metaverse Post — Lars Seier Christensen, founder and chairman of Concordium, shared his opinion about stablecoins, highlighting that they are the most essential use case for blockchain as a whole, primarily due to their potential in facilitating international transfers and settlements. The Layer 1 blockchain platform recently integrated the EUROe stablecoin.
Regarding New Zealand’s Central Bank’s Governor’s fierce statement, Lars Seier Christensen said that the Governor seems to think of algorithmic stablecoins, rather than asset backed stablecoins.
“There have been several disasters with algorithmic stablecoins, and personally, I would not rely on such projects,” Christensen told MPost. “A stablecoin should be backed by liquid assets and overcollaterized.”
Despite that, potential use cases for individual and enterprise integration of these digital assets are vast. Thus, stablecoins have prompted EU and EBA regulatory bodies to establish guidelines that ensure adequate fiat currency reserves are kept and safeguards are cemented to mitigate value loss.
Stablecoins are one of the few segments of Web3 that have seen continued interest from TradFi players over the past several years. “To see how far they have come, we can simply look at Mastercard, Visa, and Paypal and how they have integrated the technology into their services, a clear sign of long-term designs on their implementation and mainstream adoption,” said Christensen.
Apart from the promise of enhancing payment systems’ efficiency and financial inclusion, other main factors contribute to the increasing attention around these digital assets–traditional finance benefits and the establishment of guardrails in many jurisdictions. The latter promotes investor and institutional confidence.
“TradFi players are seeing stablecoins as an opportunity to supplement their services, optimizing cross-border transactions and currency exchange, as well as doing so within governmental frameworks that benefit them,” Christensen added.
Regulatory Compliance Ensures Risk Mitigation
According to Concordium’s Christensen, the suggestion for regulated banks to issue stablecoins backed by central bank deposits is an effective approach to mitigate financial risks while leveraging the benefits of digital currencies, making stablecoins a viable alternative to CBDCs.
“If we consider the solutions these represent for cross-border transactions and the reassurance of legal frameworks, it is inevitable that stablecoins will grow in mainstream use in the years to come.”
Diving into existing concerns regarding the stability and volatility of stablecoins, Christensen contends that they should instead be seen as opportunities for innovation. Thus, to mitigate the risks associated with stablecoins, using a regulatory framework that ensures compliance with AML and KYC standards and providing transparent reserve management is crucial.
“By aligning with regulatory expectations, stablecoin issuers can foster a sense of security among users and mitigate potential risks, boosting investor confidence,” he said.
EUROe, recently launched on Concordium, represents an excellent example — as a licensed operator issued it, overcollateralized with the full backing of fiat currency kept at trustworthy custodians.
The adoption of stablecoins is growing, influenced by advancing regulatory frameworks globally. Valued at over $120 billion in Q4 of last year, stablecoins have become the most widely adopted tokenized RWA class and this trend is expected to persist, fueled by rising institutional interest and user demand for a more stable digital currency.
“In countries struggling with unstable currencies or strict capital controls, it’s evident that stablecoins emerge as a compelling alternative for value preservation and transaction facilitation. In such regions, stablecoins are not merely another financial instrument but a necessary tool for financial stability and access,” Concordium’s Christensen told MPost. “The adoption of stablecoins in these contexts is more than just a possibility; it’s a pathway to financial inclusivity and stability. For these reasons, stablecoins will be embraced further in the years to come.”
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About The Author
Alisa, a dedicated journalist at the MPost, specializes in cryptocurrency, zero-knowledge proofs, investments, and the expansive realm of Web3. With a keen eye for emerging trends and technologies, she delivers comprehensive coverage to inform and engage readers in the ever-evolving landscape of digital finance.
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Alisa, a dedicated journalist at the MPost, specializes in cryptocurrency, zero-knowledge proofs, investments, and the expansive realm of Web3. With a keen eye for emerging trends and technologies, she delivers comprehensive coverage to inform and engage readers in the ever-evolving landscape of digital finance.
