Huobi Adding 4 Stablecoins in One Mega Listing Day

The fourth largest cryptocurrency exchange, Huobi Pro, is adding 4 stablecoins on one day in a magnificent move to increase trading options and pairs for its users.

What are Stablecoins?

A stablecoin is a form of cryptocurrency which is pegged to an asset that is widely used and stable enough in terms of price movements and volatility. Internationally, stable assets include USD, Euros and Gold. The stability comes from the issuing authority reputation, history of usage and consumer expectation of the value of the asset.

In the beginning, Tether (USDT) was the go-to stablecoin in the cryptoverse, not through merit but through availability - it was more or less the only one around that is widely used. This has changed drastically over the past few months, as Tether which is issued by BitFinex went through doubts of its veracity and authenticity of backing.

Stablecoins have to be backed by something of value. The US Dollar is legal tender of the United States of America, the largest economy of the world. The value of the US Dollar comes from the promise between consumers and the Federal Reserve, that the USD will be safely governed in the rule of law.

BitFinex's Tether did not have the same luxury. It started losing trust of investors when there is no concrete evidence that the Tether is safely backed by a stable asset - USD. Tether works by producing coins in exchange for ringfencing real USD in a vault somewhere. Hence, the value of USDT is safe. 1 USDT produced, 1 USD removed, and the global financial system remains of the same value. The problem arises when investors and onlookers do not trust the company to do that. After all, who would not want to produce dollars out of thin air, reasoned the cryptoverse.

The New Contenders in the Stablecoins Arena

Competitors looking on to the Tether debacle will then have to regain trust of investors in stablecoins through other means. Let's examine four such stablecoins.

Paxos Standard Token (PAX)

Paxos seeks to regain that trust by being regulated by New York State Department of Financial Services. It is issued by a financial institution, and is fully collateralized by USD. Being regulated by the State Department of Financial Services is a good step forward. Yet most of us will recall that the Lehmann Brothers Bank was also being regulated right up to its downfall. Regulations strength and enforcement in the US continues to be weaken by a Republican government keen to rout the budget of regulators and deregulate everything to a bare minimum.

TrueUSD (TUSD) is another stablecoin backed by and collateralized by USD. What sets it apart is the ability to send and receive the coin in legally protected escrow accounts that are set up with multiple banking partners. An open source smart contract will ensure a 1 to 1 parity between TUSD and USD. It remains to be seen if the smart contract will play out flawlessly.

USDCoin (USDC) is another U.S. dollar-backed stablecoin powered by CENTRE's open-source framework. It is operates within the regulated framework of U.S. money transmission laws. Any eligible financial institutions can join and transmit USDC. Similar to TrueUSD, it allows fiat to interact with smart contracts.

Gemini Dollar (GUSD) is issued by a U.S. digital asset exchange Gemini. The Gemini Dollar works simply by creating Gemini dollars at the time of withdrawal from the Gemini platform and redeemed or “destroyed” at the time of deposit into the Gemini platform. This ensures a 1:1 parity in GUSD and USD. The funds will be kept in a traditional bank and public accounting firms will examine the dollar deposit balance every month. It is an ERC-20 token.

With these 4 new stablecoins in Huobi Pro, there will be not much point of using USDT from now on. At least the author would not.

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