Bitmain, Circle to create stablecoin and central bank to take over world
A borderless global economic system fuelled by an algorithmic central bank is a very competitive product.
Central banks are a lucrative business, Bitmain co-founder Jihan Wu has previously noted, and it's one that Bitmain is keen to muscle in on with the help of a recent investment in Circle, which brings the company's paper valuation to $3 billion.
The plan is for Circle to release a stablecoin pegged to the US dollar and become something like a private central bank with the backing of Bitmain and others.
"It's [the stablecoin's] a big piece, as we acquired Poloniex and Poloniex was a crypto-only exchange," said Circle CEO Jeremy Allaire. "The way people have handled fiat on an exchange like that has been through something like Tether, and we see a lot of weaknesses and challenges with Tether."
On the surface, the plan seems almost identical to Tether. The cryptocurrency will simply be pegged to the US dollar and backed by fiat currency in a vault somewhere. The main difference might be transparency and reliability.
At the moment, Bitfinex and Tether have an outsized impact on the cryptocurrency ecosystem, thanks to the widespread use of Tether and the close ties between the exchange and the coin. As such, when confidence in either is shaken, which happens more frequently than it probably should, all cryptocurrency prices can be impacted.
This movement from its competitors might explain Bitfinex's recent fondness for listing a wide range of existing stablecoins.
But the idea goes beyond just creating a stablecoin. The other half is the creation of the CENTRE project.
The idea is that CENTRE can authorise different institutions to issue stablecoins to create a seamless global ecosystem of cryptocurrencies and fiat-pegged stablecoins of different kinds.
"Circle can be an issuer of US dollar coin, Square could be an issuer. If I got US dollar coins from Circle, I could transmit those to another digital wallet for an issuer," Allaire explained.
This meshes with Wu's vision of algorithmic central banks.
Overall, the general idea is probably to create a system that can rise above the centralised banking system of today, eliminate the artificial borders that get in the way of things and generally promote more financial inclusion and economic wellbeing for all with a crypto utopia. So the usual.
But Circle and Bitmain, and the smaller backers involved in the project, might actually achieve this goal. Other than the regulatory kerfuffles that inevitably result from trying to create a private central bank, there might be little standing in their way.
Of course, Bitmain has a clear track record of transparent self-interest, and in real-world terms, this project is mostly about making gargantuan profits. But credit where it's due – a quick, reliable, borderless and inclusive financial system is a very competitive product.
Disclosure: At the time of writing, the author holds ETH, IOTA, ICX, VEN, XLM, BTC and XRB.