Tether, the cryptocurrency I researched a couple of months ago, has overtaken bitcoin in monthly transactions by more than 18%, making it the most widely used cryptocurrency in the world despite a market capitalization that’s 30 times smaller.
Meanwhile, Facebook’s proposed Libra is angering the central banks of several countries, who say it puts global banking at risk, while Beijing is putting the finishing touches to its cryptocurrency, which will likely be launched at the upcoming Singles’ Day. At the same time, Iceland is going ahead with its digital currency on the Ethereum blockchain, with daily payments now being made with it.
What does all this mean? In contrast to the best-known cryptocurrencies, the key to widespread adoption is about stability, efficiency, guarantees and reasonable allocation systems. What’s interesting about Libra is that Facebook, with its huge base of more than 2.4 billion users, can circulate its currency in the blink of an eye, and do so in a way that the initial allocation of funds makes sense: practically anyone with a Facebook account can acquire Libras. The danger here is that this is the privatization of money in the hands of an irresponsible company that nobody in their right mind would trust with managing their finances. If Facebook disobeyed the advice of the monetary authorities of half the world and launched Libra tomorrow, what would happen? The volume of transactions would pretty much wipe out every other cryptocurrency. Sure, Libra is a good idea in that it is a clear move toward the digitalization of money, which is where we’re headed. The problem is that it’s in the wrong hands, and the signs are that some of its partners are already aware of this, despite Facebook’s denials.
Similarly, China’s cryptocurrency can be put into circulation quickly and simply, and in a reasonably fair way in terms of allocation, and with the guarantees that the Chinese state can offer. It may not, strictly speaking, be a cryptocurrency. Call it what you want: it’s definitely digital money, and it will be in the hands of a lot of people in China and around the world.
What about Tether? Its stability, its relative opacity and its ease of use means it is used by many Chinese business people in Russia to repatriate profits to China, bypassing all kinds of controls and restrictions, and giving it some 80% share of all cryptocurrency operations in Moscow’s trading desks. No blockchain, no miners, totally stable: just a simple solution to a problem.
Author: Enrique Dans