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Stablecoins herald ’most exciting time in history of money’

Exciting time: Henri Arslanian, PwC’s global crypto leader

Digitisation of money is gaining momentum across the world and Bermuda is at the cutting edge.

That was one of the takes from session at the Bermuda Tech Summit, which focused largely on stablecoins, digital currencies backed by traditional currencies and pegged one-to-one.

Henri Arslanian, PwC’s global crypto leader, said: “This is the most exciting time in the history of money. We are the lucky generation who will see one of these material changes that happens only once every other generation.”

Many central banks around the world, including the European Union and the United States are looking at issuing stablecoins.

Mr Arslanian said: “There is a lot of activity going on globally. Today, about 80 per cent of countries are doing some kind of research or experimentation on this topic.”

Asia and in particular China, was years ahead, he said, adding: “China is de facto cashless today.

“The People’s Bank of China, the Chinese central bank, has moved very fast on this. The PBOC announced that in the last couple of weeks, they’re done more than a billion renminbi of transactions, or almost $160 million. More than three million transactions have been done using CDC.”

In China, there were about 110,000 personal wallets and more than 8,000 corporate wallets, he added.

China began its largest test yet of the digital yuan this week with 200 yuan, or about $30 worth of the virtual money handed to 50,000 citizens in Shenzhen through a lottery.

To use the money, the recipients need to download the digital wallet app on their phone, which allows them to spend it at more than 3,000 participating vendors.

Bermuda’s economic stimulus token works on a similar principle. The Government announced in September that it was working on a pilot programme for the financial aid tokens with Stablehouse, a payment and foreign exchange platform for stablecoins.

The tokens are sent to digital wallets on recipients’ phones and can be redeemed at participating vendors.

Denis Pitcher, fintech adviser to the Premier, said Bermuda had made moves to build a fintech industry framework.

He said: “We announced last year that we were going to embrace one-to-one backed US dollar stablecoins for payment of taxes, fees and services. And we have now moved forward with a stimulus coin, issued by Stablehouse.”

The aim was to create a digital-asset environment on which the private sector could build and innovate, he added.

While major government investment in digital currencies is widespread in Asia, progress in the West has been driven more by the private sector.

Philippe Bekhasi, chief executive officer of Stablehouse, said there was already about $20 billion of market capitalisation in privately sponsored stablecoins.

“Stablecoins are basically digital representations of a dollar, or a euro, or some other fiat currency,” Mr Bekhazi explained.

Bermuda’s economic stimulus token would be a stablecoin, he said, as it would be pegged to the Bermudian dollar.

“What will stablecoins bring to the world?” he said. “They will cut through boundaries, simplify payments and, as much as possible, remove cash.

“Basically you take cash out of the bank, give it to a merchant and then it goes straight back into the bank. So using cash is really not that logical. We can easily replace it with a digital wallet.”

Stablehouse, he added, envisioned a world in which stablecoins could effectively talk with one another and allow a seamless payments experience when crossing borders.

CDCs are also an efficient means of delivering financial assistance funds directly to those in need, he said.

Mr Bekhasi said: “What certain countries, including Bermuda, want to do is create a token that actually gets used locally. You don’t want to airdrop stimulus dollars that end up going to Amazon in the US.”

Jill Richmond, co-founder and chief revenue officer of Jewel, a digital bank that is applying for a banking licence from the Bermuda Monetary Authority, said: “As far as Jewel is concerned, as a digitally native bank, we see ourselves as a bridge between fiat and digital currencies.

“What I mean by that is we are still working around legacy systems enabling our core customers using specifically stablecoins to enable cross-border payments.

“Also we’re here to support the whole digital-asset ecosystem by enabling them to have core banking services, and beyond that to provide additional services such as lending against digital assets.”

The lack of banking services available for digital-asset businesses is seen as an obstacle to growth of the fledgeling industry. Jewel uses a Visa-backed, digital-asset platform for institutions that could help to address the issue.

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Published October 16, 2020 at 8:42 am (Updated January 26, 2021 at 12:58 am)

Stablecoins herald ’most exciting time in history of money’

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