Switzerland to Issue Fiat-Backed Coins as a Reply to USDT and El Petro’s Manipulations

Sep 18, 2018 at 08:23 // News
Author
Coin Idol
The idea behind this new stablecoin is rather traditional for the sector - to combine all the pros of a cryptocurrency and eliminate its main shortcoming - high volatility.

Switzerland is planning to tokenize its national currency, responding to USDT and El Petro. The idea behind this new stablecoin is rather traditional for the sector - to combine all the pros of a cryptocurrency and eliminate its main shortcoming - high volatility.

The most popular stablecoin in the world, USDT, has a rather limited scope of application, and besides, it is backed by a currency that has been losing its value for a long time. But still, it has some potential. 

Should We Trust Stablecoins? 

A stablecoin, backed by fiat, can be used for cash transactions or issuing numerous financial tools, including credit for protecting capital during local currency crises and so on. At the same time, all USDT emissions are immediately credited, directly or indirectly, to the Bitfinex hot wallets for the BTC purchase. On days like this, up to half of the BTC trading comes from Tether. This is noted by many users of social networks. 

Against this background, it seems that the crypto community wishes to have a safe stablecoin with a wider functionality than USDT. Dozens of large projects, which can be divided into three large groups: stablecoins, backed by fiat or other liquid assets; coins, backed by cryptocurrencies; and coins, that are not backed by anything, annually continue on this path. 

A New Token Backed by the Swiss Franc 

The most obvious and understandable seems to be the first financial model, which is being chosen by many companies from the real sector of the economy. Some of them tokenize one of the most stable fiat currency in the world - the Swiss franc. Such model can probably be the well-executed long-term plan, considering that for the last 50 years the US dollar has lost 76% against the Swiss franc, while the latter has demonstrated the lowest volatility. 

To integrate the digital currency in a real economic sector, it is planned to issue tokens which will be fully backed by the Swiss franc. The latter will be stored in the form of paper banknotes in Swiss banks and vaults. Since the issuer company will only work with licensed financial institutions that head the TOP 10 Swiss banks, no audit manipulation is possible like in the case of Tether, which is regularly accused of issuing unsecured tokens. But what matters more is the obvious transparency for investors and partners, which is ensured through carrying out a monthly licensed banking audit and publishing open reports. If the traditional distrust of the stablecoins, that appeared because of Tether, is overcome, the new Swiss token might become the first full-fledged stablecoin with a wide range of functions, including retail trade and cross-border transfers. 

Not the First of Its Kind 

Dima Vol, the Global Ambassador at the  Mile Unity Foundation project aimed to promote XDR stablecoin across the sector of retail, b2b and intergovernmental payments (g2g) for faster and secure transactions with lower fees, showed some scepticism about this idea. He told Coinidol: 


"One more time we are being convinced that blochchainization is going to change something in national economy. But if new Swiss cryptocurrency is tied up to the fiat currency it is as stable (or unstable) as the Swiss franc and it will be controlled and regulated exactly the same way as Swiss franc. So all the benefits of "blockchain revolution" will be missed. Only truly decentralized stablecoin can give real stability and independence."

Indeed, such an initiative is far from being the first of its kind. The most famous and well-known is the attempt of the Venezuelan government to issue oil-backed Petro. However, it seems that the only place this currency actually exists is the media.  

Some time ago, a similar attempt was announced in Russia, with a bill for the project of “Crypto Ruble” even submitted to the State Duma. But with the course of time, the community has seen nothing but words either. There was also some news on attempts to create “Crypto Hryvnia” in Ukraine, but the data were even vaguer. 

And these are not the only examples - the news of someone wanting to issue their own crypto or stablecoin pops up every now and then, however with little success in turning words into actions. We have nothing to do but watch where this Swiss initiative eventually comes, especially considering the fact that it seems to be commercial, not government-backed.