It has been a long-drawn-out battle! Russia’s Ministry of Finance and the Central Bank of Russia (CBR) are the two opponents. The former supports the entry of private Stablecoins into the country. The latter believes that it is not a good idea. Caught in between are the private investors, who desire to launch these coins in Russia. If you are planning to trade cryptocurrency, here are the Types Of Cryptocurrency Trading In The Market.
The Ongoing Debate
Ivan Chebeskov is the Director of the financial policy department. The department is attached to Russia’s Ministry of Finance.
The Director declared that they would be attached to various assets. These assets were grain, ruble, oil, or grain. He also declared that this was the right path for advancing technology. Chebeskov even urged private companies to experiment with Stablecoins.
A spokesperson from CBR retorted that private Stablecoins posed high risks. It was because the group of underlying assets never belonged to the issuer. Then again, redemption at par could not be guaranteed. It was not in the hands of the issuer to do so. Above all, private Stablecoins could not always promise stability in pricing.
Views of CBR
The Central Bank of Russia favors the ruble. It considers it to be the only method of legal payment. The Bank has tremendous faith in the digital ruble. It is supposed to be a combination of the benefits of digital payments and the dependability of the country’s currency.
CBR has a department of financial technologies. Kirill Pronin is its head. He said that crypto mining would probably be legalized. However, the legalization would take place under specific conditions only.
One condition concerned the exporting of mined assets to alien cryptocurrency exchanges. Chebeskov suggested that such an action would be fraught with challenges. After all, there were geopolitical challenges, too.
Private Stablecoins
They refer to digital instruments. They may then undergo trading deals. They may even be used as a mode of payment.
Investors know that private Stablecoins possess stable values. These values are in alignment with a reference currency. Such a currency could be a commodity, such as gold. It could also be a traditional currency, such as a U.S. dollar.
Private Stablecoins are the perfect answer to an age-old issue. People were seeking ways to send and receive money across geographical locations. Similarly, there was the issue of dealing with unknown entities. The question would arise – Is that individual trustworthy, or not?
The solution has arrived in the form of the Internet and cryptocurrencies. Private Stablecoins depend upon cryptology. Why? It prevents double spending. It also provides protection against frauds over the Internet. Above all, the usage of private Stablecoins has ushered in a novel payment system. It has become possible to conduct transactions outside the traditional banking system.
How Private Stablecoins Operate
They resort to a ledger system, controlled by agents/validators. This ledger is available to the public. The agents take charge of processing every transaction. They earn rewards for completing this daily task.
Permitting vast usage of private Stablecoins, has its advantages. Suppose, the public is all in favor of it. Similarly, if developers are capable of innovating new features, over time. Then, this would become an acceptable payment system. It would enable the innovation of novel types of transactions.
One of them could be smart payments contracts. Here, it might suffice to produce a digital letter of credit. There would be no payment, until certain conditions were carried out. These conditions would have to be digitally verifiable. There would be no intervention of the human hand at all.
Types of Private Stablecoins
Two forms are popular. One form has the backing of a reserve pool of digital assets. The other one is algorithmic Stablecoin.
Reserve Stablecoins
The Stablecoin sponsor possesses liquid assets that are dominated by the dollar. These assets are available for the short term only. However, they are of high quality. These assets are the ‘reserve’. The investor uses the dollar proceeds obtained via a newly-issued Stablecoin, to purchase the ‘reserve’.
Algorithmic Stablecoins
These Stablecoins are equivalent to DAOs (decentralized autonomous organizations). They are keen to be on par with the U.S. dollar. Towards this end, they opt for arbitrage trading strategies. These strategies involve other digital currencies too.
