Fiat-Backed stablecoins are a very different animal to CBDCs, says Bowen Zhou, the founder CEO of Moneta Digital.

Speaking from my own opinion, I would like to tackle a few commonly chattered topics by some of my biggie friends and players in the financial space.

Let’s start by getting rid of the big fat elephant in the room. What a ride it has been for Terra LUNA, UST and the ever-debatable algorithm stablecoins.

Do Kwon sure tested the water with his algorithmic stablecoins. This stuff works in a hot market where everyone buys in on the idea of speculations, just like any other great concepts in a bull market or even in an uptrend market, TVLs, high APYs, yada, yada, yada. However, what we have seen in the past week, has been devastating but 100% expected.

It is like any Ponzi-hyped project doomed to burst the bubble. The value of UST first cliff-dived 60% in value to a low near $0.40. In the following days it became useless as its value became pennies to the dollar. It was delisted from most exchanges that once supported it.

Furthermore, the bleeding did not stop there; Luna has lost a staggering 99.99% of its value near $0.00013.

The main reason is that the price of its governance token, LUNA, has plummeted due to a significant market sell-off. UST has been unable to maintain its peg to the LUNA algorithm stability. If the Terra Foundation or VCs do not bail out Terra’s ecosystem, this will be one of the biggest fiascoes in the history of cryptocurrencies. 

Obviously, I believe this was a beautifully premeditated, textbook-quality short strategy, and whomever you are, your witty patience handsomely paid off.

And then, to rub salt into the wound, Yellen came out and emphasized her point that stablecoins need to be regulated. And some biggie even argued that CBDCs will become the stablecoins of crypto. SAY WHAT? 

Let me ask the audience one simple question, why are we here in crypto? Is crypto the same as securities and stocks? Ladies and gents, CBDC is a completely different animal than stablecoins.

Just to bore you to death with knowledge, Stablecoins are decentralized private virtual digital assets (VDA) issued on the blockchain that is pegged to a certain fiat currency. Users opt to use this type of borderless VDA because of its transparency, privacy, and fast transaction times.

This is opposed to CBDC, which is a centralized and digitalized national fiat that is regulated yet completely controlled by a single government or a country.

Take China, for example. The main idea of their version of CBDC is to rid the government’s burden of paper money logistics yet to have a better grasp on its citizen’s monetary activities.

So again, to my biggie friends out there, CBDCs will not become the stablecoins of our times. It will just simply be a digitized fiat partially utilizing the function of blockchain IF ANY.

Simply put, CBDCs are issued from the perspective of a single centralized government that might not be on blockchain and bordered. 

On the other hand, stablecoins are minted and transacted on borderless blockchains, issued from the perspective of users. This is the main difference, PEOPLE!

Now, let’s talk about regulations, to be or not to be that is the question. Actually, in my opinion, the answer is not simply black or white. Just like crypto, just like a lot of things. There isn’t a right or wrong answer.

I believe all assets, including digital assets, should be regulated. The question is not whether it should or should not be regulated. But who to regulate and how much involvement the authority places on the borderless digital assets. And who is that authoritative figure?

Crypto will always be decentralized and that is its main idea of it. I believe regulations should be placed more on the safety of users’ assets and not to regulate or limit the issuers.

Lastly, the fact is the only stablecoin that can be called a stablecoin should be and only be asset-backed stablecoins pegged to a stable value, just like MMXN.

Most importantly, asset-backed stablecoins need to be issued for the users with the perspective of helping them improve their daily lives. It should not be a digital coin that FOMOs the market in a “creative” Ponzi-like scheme, just so the few can profit from holding on to a sizable market share.  

Remember, blockchain is made by the people for the people; it will only live on if we stay true to this motto. Be bold, be borderless people!

Bowen Zhou is the founder CEO of Moneta Digital, a project created to help millions of Mexican users solve the needs on fiat entry and exit channels to the cryptocurrency space. To fill the gap between fiat and crypto, MMXN was designed and developed as a digital stablecoin that is pegged 1:1 to Mexican pesos. Users can intuitively understand the concept between stablecoin and Mexican pesos fiat, as well as store a stable value in cryptocurrency without going out to fiat.

Got something to say about fiat-backed stablecoins or anything else? Write to us or join the discussion in our Telegram channel. You can also catch us on Tik Tok, Facebook, or Twitter.

The post Fiat-Backed Stablecoins are the Only Safe Option: Here’s Why appeared first on BeInCrypto.

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