SINGAPORE FINTECH FESTIVAL 2022

Digital currency an integral part of the future, but adoption remains a challenge

Circle’s chief financial officer Jeremy Fox-Geen thinks regulation is key to helping stablecoins gain wider acceptance

IT HAS been nearly eight years since the term "stablecoin" was introduced to the world through the birth of BitUSD - the brainchild of blockchain veterans Charles Hoskinson and Dan Larimer.

There are now over 200 stablecoin projects in play, worth over US$140 billion in total market capitalisation, data from CoinMarketCap showed.

Despite this, the worldwide adoption rates for such digital currencies have been slow - which Jeremy Fox-Geen, chief financial officer of Circle, said is a "chicken and egg problem".

Circle is the issuer of USD Coin, a stablecoin backed by US dollars. Stablecoins are cryptocurrencies tied to a stable asset such as fiat currencies like the US dollar. They serve as a less volatile medium of exchange as compared to other cryptocurrencies, which are typically subject to greater fluctuations in value.

"Today, digital currency is available typically only in the crypto wallet," said Fox-Geen.

"Right now, not enough people have it, and not enough people want to use it".

Merchants and consumers are reluctant to adopt digital currencies such as stablecoins as a payment method, given the market already has several well-established payment gateways.

The unregulated nature of digital currencies has not helped either.

Regulators have been paying closer attention to the industry's risks following the recent crypto boom.

Just last month, the White House laid out recommendations for US agencies to better regulate crypto. The framework singles out stablecoins, warning they could create "disruptive" runs if not paired with appropriate regulation.

The Monetary Authority of Singapore (MAS) in August also announced plans to consult the public on regulating stablecoins, and noted that the collapse of prominent tokens such as TerraUSD and Luna illustrates the high risks it has been warning about in cryptocurrencies.

While the financial sector regulator sees potential in digital asset innovations, it strongly discourages speculation in cryptocurrencies.

Fox-Geen believes being subject to greater regulation and public scrutiny lends greater credibility to digital asset companies. Circle is currently applying for a payments licence from MAS, while at the same time eyeing a listing on the New York Stock Exchange through a special purpose acquisition company (SPAC) merger with Concord Acquisition.

Circle's rationale for going public is simple: It wants to be seen as a company that is subject to an added layer of oversight, which Fox-Geen believes would give the company "the highest reputation for trust, transparency and integrity".

"We think becoming a public company is just the next step on the journey to be the most trusted Internet-native financial services (provider)," he said.

While the group had expected transactions to close by Q4 last year, these plans have been delayed as the registration process has not yet been finalised with the Securities and Exchange Commission (SEC).

This comes as the SEC appears to have ramped up scrutiny on SPAC combinations, in order to better protect investor interest against these blank cheque companies.

Fox-Geen, however, remains optimistic about the listing going through, even though he acknowledged that the timing is in the hands of the SEC.

Besides the listing, Circle has also been actively partnering other merchants - such as Visa and Mastercard - to enhance adoption of stablecoins as a payment alternative.

Fox-Geen believes "digital dollars" such as the USDC are a far quicker and cheaper method of sending money from one entity to another.

Beyond fees, he also thinks stablecoins provide greater utility than fiat currencies because stablecoins are programmable. This will enable all sorts of new use cases, such as new forms of commerce and new forms of financial services, said Fox-Geen, though he believes the industry is still in its early days.

"Once it gets going, more and more people are going to see the utility and benefit, just like the emergence of commerce on the Internet," he added.

"We're going to see the emergence of all sorts of new forms of commerce, and quite possibly the complete rebuilding of the financial services industry."

For more stories, go to bt.sg/sff2022

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