10 Highlights From “Stablecoins Are Killing It” Episode #8 Featuring Bank Frick & Quantoz
On July 16th, “Stablecoins Are Killing It” Episode #8 featured Julien Hawle ( Head of Blockchain Lab at Bank Frick) and Mark Reuvers (Marketing Specialist at Quantoz). Lichtenstein based Bank Frick and Netherlands based Quantoz have partnered to offer a “Stablecoin as a Service” (SCaaS), effectively productizing transparent and compliant stablecoin solutions.
Unfortunately, due to a technical glitch, we don’t have a replay of the call. However, Mark and Julien each provided their five highlights from their presentations. Here is Bank Frick’s presentation and here is the presentation from Quantoz.
First, Mark’s five highlights:
1. Solutions are being created where end users use stablecoins without knowing it
The StableCoin as a Service system allows end users to use stablecoins for payments and loyalty programs without them being aware that they are using stablecoins. End users have a private and public key that allow them to make transactions on the Stellar blockchain, but the end users do not have to own Stellar Lumens as transaction fees are paid centrally by the issuer.
2. Stablecoins can be used for micropayments
With stablecoins that are designed and transacted on the Stellar blockchain, transaction fees can be as low as €0.000004. This enables companies and individuals to start making and accepting micropayments without worrying about the associated transaction fees.
3. Stablecoins can be used to create new revenue and business models
Thanks to the low transaction fees of stablecoins, companies can start changing the way in which they monetize their products and services. Stablecoins are great enablers in the reorganization of supply chains and in the changing dynamics between businesses and consumers. The video below provides an example of how the StableCoin as a Service system is currently used for this:
4. End-user privacy can be maintained, or even improved, in compliant private payment networks
Private payment networks can be designed so that participants sign up with one central issuer. This issuer can see who pays, but not what they pay for. Other participants within the network can’t see who pays, but they know that they can trust the payment. In a network with service providers and consumers, the service providers do not need to deal with GDPR regulations, while the consumers keep their privacy.
5. Stablecoins can be used to digitize and tokenize loyalty programs
Blockchain-based loyalty programs enable the instantaneous and secure creation, redemption and exchange of loyalty reward points across programs, merchants and industries. Through secure and transparent transactions, stablecoins can be used to reduce system management costs associated with bookkeeping, errors and fraud. Through these costs savings and the ability to gather and analyze data for personalization, this creates a more valuable loyalty program ecosystem for all participants involved.
Here are Julien’s five highlights:
1. StableCoins issued by Bank Frick are always backed on a 1:1 level with a regulated counterparty
All issued Stablecoins (SC) are always fully backed. This means, if there are 100 SC issued and the SC is nominated in Euros then there are 100 Euros in a backing account held by Bank Frick. The system was designed to hold the peg. In addition, an issuer can mandates that BDO Switzerland do an independent audits to confirm the stablecoins are fully backed. The combination of a regulated counterparty that custodies the FIAT funds (Bank Frick) and an independent auditor (BDO Switzerland), enables an issuer to provide his customers with the needed assurances.
2. Self-Issuance Is PSD II compliant without the need of an e-money license
In order to issue a stablecoin (global acceptance for multiple use cases, like USDC or USDT) in Europe, the issuer is required to have an e-money license granted by the local regulator. The license is expensive and time consuming to obtain. With the introduction of the Payment Service Directive I & II (PSD I & PSD II) and an exemption from the e-money license, provides a regulatory framework to self-issue stablecoins if the stablecoin is limited to a closed loop ecosystem.
3. The system was designed to enable an issuer to fit the StableCoins as a Service product to the issuers Business Case.
The service provides the issuer flexibility to fit the StableCoin as a Service product to the issuer’s business case. In theory, it is possible to issue multiple stablecoins, denominated in different FIAT currencies. Further, the system also allows the issuer to introduce an integrated token based loyalty program
4. Stablecoin as a Service can only be used in a close loop ecosystem
PSD II compliance requires that a closed loop ecosystem be defined. The ecosystem can be defined according to brand or product. If an ecosystem is defined by brand, the usability of the stablecoin is limited to the brands’ stores and point of sale. If an ecosystem is defined according to a product, the product the stablecoin is used for has to be precisely defined precisely and then the stablecoin can only able to be used for that defined product.
5. Blockchain transactions fees are payed centrally by the issuer to increase user experience
The user experience for both the issuer and consumer is simple and straightforward. As a result, the customer never deals with the complexity of blockchain technology and crypto assets. For example, the issuer pays the associated blockchain transaction fees on the public Stellar Network. This was done to enable the customer to immediately use the stablecoin without acquiring XLM to pay the networks transaction fees.
Finally, we asked our panelists to answer two questions:
Q1. What’s the most most surprising thing you’ve learned about stablecoins?
Mark: Ever since joining Quantoz, I’ve been surprised by the level of innovation in the stablecoin space that is taking place behind the scenes. While there few mentions of stablecoins in the traditional media, mostly related to CBDC’s or Libra, there is a lot going on just below the surface. I believe that the first stablecoin use cases for the ‘normal’ consumer (those who currently do not have a specific interest in cryptocurrencies) are just one or two years away.
Julien: I was surprised by the lack of knowledge regarding regulations as they related to stablecoins. For example, in Europe stablecoins are regarded as e-money and therefore are regulated and a license is required.
Q2. What do you think we’ll be talking about regarding stabelcoins a year from now?
Mark: Related to my previous point, I think we will be talking about the first few use cases where ‘normal’ consumers are using stablecoins, WITHOUT THEM ACTUALLY KNOWING IT. I believe they will think it’s ‘just another app’ or ‘just some digital token’. I believe that stablecoins will enable businesses to bring superior services to the end user, and that these businesses will introduce stablecoins to the end user as a part of the overall superior solution.
Julien: I think we ‘ll see the first real world testing of CBDC, and the use of stablecoins will increase over the next year. Further, I think we’ll see new collateralization models and functionality. Finally, financial institutions will start using stablecoins and offering related services, just as they do today with FIAT.
Click here to register for “Stablecoins Are Killing It” Episode #9 featuring Joel John, one of the best analysts writing about stablecoins; and Gil Hildebrand from Gilded.
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