What are Stable Coins? 101: Introduction

Stable coins represent a digital value of an existing fiat currency that can be quickly moved between different wallets faster than traditional banking.

Stablecoins became popular in 2018 during Bitcoin’s rise from $1000 - $20,000 per coin. Stable coins' usefulness and utility come from being able to trade in and out of the market against a stable USD, EUR, or GBP value instead of a volatile asset like BTC or ETH .

Previously, to step out of the market, a trader would need to trade on a fiat only trading exchange, which there were very few in 2017 and even 2018.

Stablecoins allowed many crypto-only exchanges to operate and allow their users to trade and monitor their portfolio against a fiat value without having to carry the required licences and permissions from banking partners to operate.

The downside, however, is the creation and backing of these stable coins from their issuers. Stable coins by design are supposed to be 100% backed by the fiat balances they represent. If $10,000,000 worth of Stablecoins is issued on a blockchain, there must be a bank account in the issuer's name with an account balance of $10,000,000. Without auditing and transparency, some stablecoins could be insufficiently backed.

The future of stablecoins issued on blockchain technology could reside with global central banks. The ability to create instant disbursement of funds that follow KYC and AML requirements in real-time could revolutionize government lead monetary policy.

The use of blockchain technology in this use case would also promote greater transparency in the use of the technology between businesses, banking and citizens of each country.