Larger Stablecoin Adoption On The Cards
By Laxmikant Khanvilkar
Recently, the Central Bank of Iran, in collaboration with the Russian government, jointly issued a new cryptocurrency backed by gold. Vedomosti, the Russian news agency mentioned that Iran is working with Russia to create a “token of the Persian Gulf region” that would serve as a payment method in foreign trade.
The token is projected to be issued in the form of a stablecoin backed by gold, according to Alexander Brazhnikov, executive director of the Russian Association of Crypto Industry and Blockchain.
Both countries are trying to increase use case of the stablecoin. Being a blockchain technology-based token, it will enable cross-border payments, while ensuring return on investment, efficiency gains and the mitigation of pain points. Their decision has set the tone for global stablecoin adoption on a larger scale.
Several financial institutions are expected to participate in consortia to develop common objectives and standards for blockchain and distributed ledger technologies (DLT). In fact, stablecoins are among many use cases banks have prioritised in their blockchain strategies over the next five years.
The introduction of enterprise-grade blockchain has encouraged large-scale investment into a variety of evolving protocols that meet payments systems’ threshold for privacy and permissions.
There are several opportunity present in blockchain technology adoption. To simplify the use case outside of cross-border payment, the financial institution will have to overcome obstacles and potential changes in regulation in the long term. A recent survey of bank respondents showed that they have set a priority towards achieving payments solutions in the next 12 months. DLT’s emerged as the most complementary feature with regards the processes involved in running a payments system. That use case is likely to offer the highest return to investment in the long run.
In the near term, there will be greater adoption of stablecoins, largely fiat-backed. This will be driven by Facebook’s Libra, and projects such as Fnality and JPMorgan’s stablecoin. Central bank digital currencies will be become a reality, with the People’s Bank of China (PBoC) set to be the first issuer later this year.
Interoperability across blockchain platforms will improve. The differences between the major blockchain protocols remain significant, but there is an open dialogue for collaboration and research into how assets on different chains can co-exist. Last year saw the deployment of multi-cloud blockchain, which is likely to result in successful crossblockchains pilots in the coming months.
Major banks and financial institutions have realised that blockchain technology could vastly improve the efficiency of their processes, particularly in cross-border payments, and reduce costs.
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