Stablecoins are becoming popular. There’s no denying it; a number have hit the market this year. In fact, just yesterday, the Winklevoss twins announced the Gemini Dollar—the first-ever regulated stablecoin.
Not to mention Carbon launched CarbonUSD, a US dollar backed stablecoin, today.
And yet, despite the crypto market displaying optimism around the latest trend in the industry, one Berkeley Professor provided an alternative view.
He said there is no indication that stablecoins are viable.
Berkeley Professor Talks Stablecoins
Stablecoins are cryptocurrencies pegged to a stable asset. That’s as simple as it gets. The Gemini Dollar, for instance, created by Gemini Trust Co (Tyler and Cameron Winklevoss’ company) will be pegged to the USD at 1:1.
But Barry Eichengreen, Economics Professor at the University of Berkeley, said that just because these coins can be pegged to reserves of fiat currency doesn’t mean they are “viable.”
Sure, he admits that stablecoins appear to solves problems of conventional cryptocurrencies, like Bitcoin (BTC). With these digital currencies, trading prices are volatile, making their purchasing power unstable.
Further, Eichengreen said that because their value is “stable in terms of dollars or their equivalent,” stablecoins are attractive as:
- Units of account
- Stores of value
However, according to Eichengreen, “this doesn’t mean that they are viable.”
Changing the Mind of the Crypto Market
It seems unlikely that Eichengreen’s comments will cause the crypto market to see a disappearance in stablecoins. Yesterday, a well-known crypto player said the Gemini Dollar is a sign that the industry is maturing.
Meanwhile, Tyler Winklevoss said that the Gemini Trust stablecoin will solve both trust problems and computer science problems.
Building a viable stablecoin is as much of a trust problem as it is a computer science one. The Gemini dollar is the first stablecoin in the world that has solved for both. That’s the innovation here. From our white paper: pic.twitter.com/g4IEXl6Ldm
— Tyler Winklevoss (@tylerwinklevoss) September 10, 2018
So the question is: who should we, the people, believe?
Like with most new things, watch from afar before jumping in. How the Gemini Dollar does on the market will be an indication of how trustworthy stablecoins are. If it flops, perhaps you’ll be siding with Professor Barry Eichengreen.
Featured Image: Depositphotos/© AndreyPopov