Tether to launch a stablecoin pegged to the British pound
Tether adds to its stablecoin line-up with GBPT pegged to British pounds sterling. Will it help restore confidence in stablecoins?
Stablecoin stalwart Tether has announced it is to launch a GBP-pegged stablecoin - GBPT - in July, 2022.
The new coin will join its US dollar-pegged USDT, euro-pegged EURT, offshore Chinese yuan-pegged CNHT and Mexican peso-pegged MXNT.
Concerns over stablecoins still remain following the collapse of TerraUSD. But Tether is continuing to press on and has chosen to set its sights on the UK.
A GBP-pegged stablecoin
Stablecoins are a type of cryptocurrency whose value is tied to an asset such as the US dollar to try to stabilise the price.
Cryptocurrency prices are famously volatile, but the aim behind stablecoins is that by pegging their value to fiat money (or other assets such as gold), crypto investors have an option that can help them avoid some of the extreme price fluctuations.
Tether's GBPT stablecoin will be pegged 1:1 to the British pound and will start as an ERC20 token on the Ethereum blockchain.
Up until now, the market for stablecoins has largely been focused on the US dollar. Tether's decision to launch a GBP-pegged stablecoin suggests that the UK appetite is growing.
Tether CTO, Paolo Ardoino, said "We believe that the United Kingdom is the next frontier for blockchain innovation."
The UK Treasury has set out its intention to make the UK a global cryptocurrency hub. This will involve bringing stablecoins under its regulatory framework and could eventually include allowing stablecoins as a means of payment.
The future of stablecoins
It's been a rough road for stablecoins over the past few months and many remain concerned about their place in the crypto market. The collapse of the Terra blockchain sent shockwaves throughout the industry and sparked the market's current decline.
As a result, Tether's own market cap has been shrinking, dropping below US$70 billion (approximately AUD 101 billion) for the first time since 2021 according to CoinMarketCap.
There are concerns that stablecoins are not as stable as some suggest. But Tether's coins are fundamentally different from TerraUSD. Tether, and the soon-to-be launched GBPT token, are asset-backed. This means they are 100% backed by cash or cash equivalents like bank deposits, Treasury bills and others. TerraUSD (now known as TerraClassicUSD) was not backed in this way; an algorithmic stablecoin, it was backed mainly by another Terra token.
However, it's likely to take some time for trust in stablecoins to return. There have been calls for greater transparency about the quality and liquidity of the investments used to back them.
If you're a crypto investor who is considering stablecoins, it is important to understand that even asset-backed coins still carry a high level of risk. It's also worth researching how stablecoins are backed and what would happen if one was to depeg from their fiat currency.
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