Within the past 12 months, stablecoins have transformed from a niche idea to tackle the issues of a volatile market into methods of payment championed by some of the world’s biggest and most powerful tech companies.
Facebook’s announcement that it would be supporting the launch of a reserve-backed stablecoin played a vital role in turning around the so-called “crypto winter” by boosting Bitcoin (BTC) prices above $10,000 for the first time in over two years. Since then, the world’s number one cryptocurrency exchange, Binance, has thrown its hat into the ring with its own stablecoin development project, “Venus.”
Binance launches Venus to create localized stablecoins
Not content to let Facebook call the shots for mass stablecoin adoption, Binance announced on Aug. 19 its open blockchain project, Venus, that will focus on developing localized stablecoins around the world.
According to the press release, Binance will forge new partnerships that straddle both the public and private sectors, encompassing governments, technology companies and other projects across the blockchain ecosystem. Binance co-founder Yi He summed up the aims of the new project in a statement:
“We believe that in the near and long term, stablecoins will progressively replace traditional fiat currencies in countries around the world, and bring a new and balanced standard of the digital economy.”
Owing to its top-spot exchange position and in public chain technology, Binance will hit the ground running. Binance Chain already enjoys wide usership, and the company has since issued fiat-backed stablecoins pegged to both Bitcoin (with the ticker BTCB) and the British pound (listed as BGBP).
The firm says it will harness its pre-existing global blockchain system to bring a cross-border payment system to customers, along with new stablecoins. Binance reported that it will be providing technical support, as well as all compliance needs.
By virtue of its astrological name alone, it’s clear that Venus is gearing up to occupy the same space as Facebook’s brainchild, the fiat-pegged stablecoin Libra, which is set to be the powerhouse behind a comprehensive payments system across the social media network’s three key apps: WhatsApp, Messenger and Instagram.
Shortly after the announcement, Bitcoin buoyed by almost 5%, challenging $11,000 on Monday, Aug. 19. Despite the initial positive market response, Gregory Klumov, CEO and founder of the Stasis stablecoin, is skeptical about the project in the short-term, saying that it may face some adoption challenges among ordinary users:
“Adoption requires a concise and clear legal environment, operational robustness, and serious relationships with financial institutions. For example, no Maltese bank services companies that have applied for a VFA license. I believe digital asset creation and trading-related activities should be completely separated. Evolving crypto regulation globally will have barriers in place similar to Glass-Steagall act in US back in 1933, restricting the mixing of two activities, inevitably creating a conflict of interest.”
Similar projects, different aims
Although the two projects share an astrological heritage, what little information currently available paints a divergent picture of the two projects’ scope and target markets. Facebook’s stablecoin payment project focuses on creating a universal digital currency that would allow customers to sidestep fees associated with international payments on credit cards and costs incurred by remittances.
To understand how Binance’s project differs, it’s important to look into the wording of its press release. The notice states that the company seeks to “develop localized stablecoins and digital assets pegged to fiat currencies across the globe.” Although both of the stablecoin projects may appear to be international in scope, Binance’s will focus on specific target markets. In other words, this means that Binance will likely work with specific countries and regions in developing their own digital currencies to help establish financial autonomy and security.
Despite the “localized” approach, some members of the crypto community expect Binance’s project to aim eastward, with the goal of claiming a stake in the Chinese payments market.
WeChat operates so effectively in China that it has almost completely replaced traditional methods of payments, with almost 1 billion users globally. Senior market analyst at eToro Mati Greenspan, however, expressed his doubts about Binance’s pull outside of the crypto world:
“It seems that those are some extremely optimistic goals for a crypto project. Binance is a pretty big deal in the crypto community but compared to Alibaba and Tencent they're smaller than ants. Let alone the Chinese government or their money. In fact, I'd be surprised to see any acknowledgement from Chinese authorities at this stage.”
Klumov said that a number of stumbling blocks lie ahead if Binance tries to expand its user base eastward from its Maltese hub:
“The Asian region has its own issues: India has been very cautious with blockchain technology and crypto assets and China is not the kind of country that would co-partner with an independent business to issue a currency. So there will be regional markets like Vietnam or Korea but stablecoins backed by the respected currencies failed to achieve any meaningful emission for now.”
Facebook, on the other hand, does not even need to break into the Chinese payment market to easily surpass WeChat’s user numbers. The Libra project centers around a wallet, dubbed Calibra, that will be native to all of Facebook’s wholly owned apps — as well as have its own independent, purpose-built app. The significance of Calibra is that, from day one, it will have instant access to all of Facebook’s 2.4 billion users, leaving both WeChat and Venus in the dust.
For Klumov, the stablecoin projects from the tech giants are not going to move mountains overnight but do represent an important development for the digital asset industry in the long term:
“Traders and clients are skeptical after Libra's demise by multiple policymakers globally so I don't anticipate any associated market impact short term. Longer-term, it is a positive accomplishment as the digital asset industry will evolve and adapt to satisfy regulatory requests or collect enough consumer votes to lobby for a much-needed change.”
Lost in translation: Fighting talk in Chinese-language announcement
After Venus launched, Twitter users commented that the project seemed to compete with Libra, with one user tweeting, “Binance is ready to dominate the world by launching project ‘Venus’ and rival Libra by developing localized stablecoins worldwide.”
TechCrunch reported that CEO Changpeng Zhao (aka CZ) responded, stating that the company is focusing on pushing adoption and is “always happy to co-exist.” CZ also stated his belief that Venus will actually help Libra. Although the Binance CEO might have mastery over his mild tone, it seems that the Chinese version of the Venus press release is a lot more passionate.
Dovey Wan, founding partner of Primitive Ventures and active commentator on crypto news, drew attention to a drastic change of message and tone between the Chinese- and English-language versions of Binance’s project Venus press release.
The introductory paragraph of the English-language version announced the project in largely neutral terms, and highlighted Binance’s wish to collaborate widely in order to bring about localized digital currencies:
“Binance today announced its plans to initiate an open blockchain project, Venus, an initiative to develop localized stablecoins and digital assets pegged to fiat currencies across the globe.”
The statement then goes on to talk about new partnerships on all levels. By means of comparison, Wan tweeted a translated version of the Chinese-language press release, revealing a robustly worded text that began by railing against “financial hegemony” and mentioning the issues of structural power in finance:
“Financial hegemony has been indulged for a long time. Groups with first-mover advantage have been enjoying the monopoly benefits brought by financial hegemony. The strong are getting stronger; while more regions and individuals often pay a lot of hard work, but they are just being taken advantage by the former. The weak are getting weaker. Binanace hopes to leverage the technological innovation power given by the time to initiate a new currency journey, to create independent ‘regional version of Libra,’ which we call ‘Venus.’”
The second paragraph lionizes Binance’s alleged role in transforming Malta into a “global blockchain nation,” as well as stating that the company has strong relations with United States regulators. Clearly trying to portray itself as a company with both international influence and scope, the release further emphasizes the company’s role in developing blockchain in Africa, along with its established links in both Asia and Latin America.
This segment of the text ends by seeking to reassure the reader that “the cornerstone of all this is the deep mass base we have on a global scale.” The paragraph portrayed in Dovey Wan’s tweet is completely absent from that of the English-language press release.
Noting that the Chinese-language announcement has developed by this point its own narrative entirely, Wan commented on how the company stressed its desire to reshape the international financial system:
“We hope our dream to break the financial hegemony and reshape the world financial system can be realized. Let the late-movers acquire more financial power to safeguard their financial security, and improve the efficiency of cooperation between the state and the country, among the peoples.”
For Wan, the final segment of the Chinese text was the most interesting, and it’s easy to see why. The translation tweeted by Wan contains an extended section of “Advice for Regulatory Policy.” Wan interpreted this as an on-the-nose message to the Chinese central regulatory body.
A few paragraphs later, the Binance press release takes aim at China, celebrating the financial experiments in Shenzhen’s special economic zone while imploring the government to “establish the core strategic position of the blockchain industry and digital stable currency in the future financial system.”
Per the tweet of the translated announcement, the company further recommends that the Chinese central government implement further reforms:
“We recommend establishing a regulatory sandbox mechanism and pilot payment settlement services based on digital stable currency. Third, we recommend allowing private enterprises to issue digital stablecoins and develop cross-border payment settlement systems.”
This section of the Chinese-language announcement also names Facebook’s Libra project as an example of how government and companies are coming together to promote fintech advancements. The company states that “instead of resisting change and losing the opportunity, it is better to embrace change.”
Chinese central bank reacts to Libra — Venus up next?
While the Venus launch has yet to solicit a response from the Chinese government, it seems that Facebook’s Libra project has really gotten under its skin. On Aug. 20, the People’s Bank of China (PBoC) said that it is almost ready to launch its own government-backed digital currency, influenced by none other than Libra.
Although work began on research and development for the digital currency back in 2018, a report from China Daily, a news portal owned by the Communist Party of China, revealed that Libra may result in Chinese regulators reconsidering the model of the central bank digital currency (CBDC).
Yang Dong, the director of the Research Center of Finance Technology at Renmin University of China, told China Daily that Libra had ignited lively debate among regulators and sparked the need to diversify the project away from governmental institutions, stating that, "Further testing is needed before officially launching the Chinese CBDC, gaining inspiration from the Libra."
As previously reported by Cointelegraph, China’s new digital currency can’t really be called a true cryptocurrency, as it will still be run through the country’s central bank. PBoC Deputy Director Mu Changchun also stated that the currency will not seek to establish itself as either a competitor or replacement for the Chinese yuan, saying, “It can use existing resources to support and develop commercial banks and smoothly promote digital currency.”