2 USD Backed Stablecoins Expected to Have Big Impact

| Publish date: 09/13/2018
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Experts believe that the two new US Dollar backed stablecoins launched on September 10 are going to have a big impact on the cryptocurrency market. The stablecoin launched by Gemini is called the Gemini Dollar (GUSD), while the one launched by Paxos is called Paxos Standard (PAX).

Both the new stablecoins are approved by the New York Department of Financial Services (NYDFS). Both are also backed by the US Dollar on a 1:1 basis, with each unit of the stablecoins representing the value of 1 US Dollar.

Using Ethereum to Deploy GUSD and PAX

Before the launch of these two stablecoins, there were only two stablecoins in the crypto market – Tether (USDT) and TrueUSD (TUSD). Both Tether and TrueUSD have been integrated into major cryptocurrency exchanges such as Bitfinex, Binance, Huobi, OKEx and HitBTC.

There are a few key differences between those stablecoins and the two new ones. GUSD and PAX are being launched on the Ethereum network using the ERC-20 token. This means both GUSD as well as PAX systems will be completely integrated with Ethereum’s network of smart contracts.

What this means is that neither of the two new stablecoins have to worry about creating a network from scratch or having to rely on third party wallet services to move their stablecoins around.

Tether and TrueUSD, on the other hand have their own networks as well as wallet services, but have to rely on third parties for their transfers.

Another very important feature is that since both PAX and GUSD are regulated stablecoins, they are a lot more credible than either USDT or TUSD.

Integrating Crypto and Global Finance

Investors are becoming more interested in the autonomous economy (read: cryptocurrency sector) that is operating independently of the broader government controlled global financial markets.

And despite the fact that the correlation of market movements between the tradition equities markets and the cryptocurrency market remain low, there is slow integration being witnessed between the two sectors.

This integration is being strengthened by the introduction of fiat currency-backed stablecoins such as Gemini Dollar and Paxos Standard. However, this integration isn’t expected to increase the correlation between the two markets. Rather it is expected to ease the process by which institutional investors can gain entry into and commit to the cryptocurrency market.

According to the Chief Executive Officer of Shapeshift, Eric Voorhees, this integration between the global finance and crypto finance markets is actually a monumental event and it needs to continue so that the crypto asset classes can not only survive but also – in the long run – compete with reserve currencies as well as traditional stores of value.

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