CEO of Tech Start-Up, Circle: “All Fiat Currency will be Crypto”
Since its inception, the goal of cryptocurrency has been to supplant fiat currency not just on a local or national level, but on a global scale. The ability to fully secure an entire financial system on a blockchain would allow for faster transaction times, lower fees, and better record keeping since additions to a blockchain cannot be altered without modifying the rest of the chain proceeding it.
The tech start-up, Circle, has big plans to make that crypto-only future a reality. CEO of Circle, Jeremy Allaire, said in an interview with CNBC that:
“Our view is that all fiat currency will be crypto. It seems inevitable at this point.”
The start-up is based on a blockchain application that allows users to send money to each other for free almost instantly. One of their other services includes the ability for Circle users to trade bitcoin and Ethereum in an over-the-counter platform, filling a niche for institutional investors to occupy in a market where most people are forced to trade crypto through highly centralized exchanges.
Circle proposes a “stablecoin” which will be pegged to the USD and act as a cryptographic analog to the fiat currency, deriving one hundred percent of its value from the current value of the cash backing it. Coins like this have been proposed before, like Tether USD, which has come under fire recently with its connection with the Chinese exchange Bitfinex and its possible effect on the market in the last quarter of 2017.
An issue with these so-called “stablecoins” is that they are centralized by default. One authority has control over the supply and therefore can control the value by adjusting the circulating supply which is essentially the fiat system. What a stablecoin neglects to include is the most valuable aspect of cryptocurrency: decentralization.
By just creating coins that are pegged to fiat currencies, it undercuts the incredible changes cryptocurrency could bring to the global financial system through redistributing control of the currency across the entire market instead of being controlled by a central bank or company. Until decentralized coins like bitcoin or Ethereum are adopted and used at a level closer to that of fiat cash, the volatility of these cryptocurrencies will remain high. Eventually, the few issues that do arise from the shortcomings of decentralization will be solved through future developments. Until then, however, these pegged “stablecoins” might be the stepping stone that is needed to transition the world into a system more heavily reliant on cryptocurrency and blockchain technology.