The Bank of France is among the most conservative institutions, suspicious of any innovations. All the more sensational is the statement of bank’s President Francois Villeroy de Galhau that he sees the financial future in stablecoins. De Galhau is forced to admit that this asset is able to occupy a worthy position in the modern economy.
Most cryptocurrencies have a very volatile rate, which obstructs their use for financial operations. Even the most popular coin, Bitcoin, can get 10 percent up or down in a day. Such volatility does not allow using Bitcoin for goods and service payments.
In 2011, the average daily bitcoin volatility reached 15.8%, in 2019 this fell to 1.8%. However, these are too large fluctuations, making transactions overly risky.
Stablecoins solve the problem. These are cryptocurrencies based on the blockchain too, but their rate is tied to conventional financial assets. That is, transactions are carried out in an open market and real-time, but the value of the coin itself is tightly connected to euro, dollar, pound sterling or other assets. Therefore, investors minimize risks.
The potential of blockchain is best demonstrated by the development of the largest Japanese bank Mitsubishi UFJ Financial Group (MUFG). This financial industry leader launches its own fixed-rate cryptocurrency. Moreover, it will be used both for interbank payments and for settlements of individual clients. You will be able to hold deposits in this coin, pay with it for purchases and utilities.
The banking group Mitsubishi UFJ Financial Group ranks sixth in terms of assets under control, worth $ 2.5 trillion. It owns 20% shares of Morgan Stanley (USA).
The financial giant believes that transition to blockchain will be cost saving. According to preliminary calculations, the cost of MUFG stablecoin transaction will be 80-90% cheaper than that if using yen.
Central banks are yet uncertain about cryptocurrency. Despite their convenience for transactions, authorities fear the loss of control over crypto emission and high risks of technical failures. In early 2019, Brazil launched a pilot project, but any conclusions on its effectiveness are premature.
The pioneer in state cryptocurrency was Sweden. Back in the mid-2018, Sweden announced the upcoming launch of an e-krona, but it never reached practical implementation.
The only country where currently state stablecoin actually operates is Venezuela. But because of the political crisis country’s financial system is paralyzed, and no one cannot evaluate the success of this undertaking. There were no critical failures in the blockchain so far, but this product did not receive mass distribution.