Welcome to Swarm Markets’ media memo. This weekly update provides comments from Swarm Markets’ co-founders, Philipp Pieper and Timo Lehes, on key industry news that has caught our eye, plus our own developments.
Comments available on the following news items:
- Inflation-proof stable coins could be a game-changer, but they need to be pegged to real assets
- G7’s coordinated crypto regulation strategy must be fair and even-handed
- Blockchain industry to grow 67% annually until 2028
Inflation-proof stable coins could be a game-changer, but they need to be pegged to real assets
Following the financial crisis, many people thought inflation was dead. In fact, it’s been at least a decade since investors had to worry about the eroding effect of rising prices on their purchasing power. Until last year, that is.
Whether you were invested in crypto assets or traditional asset classes such as equities or bonds, investors spent much of last year working on strategies to ensure their portfolios kept pace with the rising cost of living.
Therefore, it’s no surprise to hear that Coinbase is currently working on a stablecoin – or a so-called “flatcoin” – that tracks and protects against inflation. It’s easy to see the attractions of a game-changing inflation-proof stablecoin, particularly given the events of the past few years, but we have our reservations.
While details are thin on the ground, Coinbase said it would be willing to explore “other forms of ‘flatcoins’ that do not peg to fiat but rather fill the space between fiat-pegged coins and volatile crypto assets”.
We eagerly await further details, but we have major concerns about the creation of a stablecoin that is not pegged to a real world asset, such as a fiat currency, and believe it could be inviting trouble.
Instead, having the mechanisms and processes in place to bring real world assets on chain will give those already in the DeFi ecosystem access to a greater diversity of trading and hedging products. TradFi needs greater efficiency and DeFi needs greater stability. Tokenization of RWAs fulfills both criteria.
G7’s coordinated crypto regulation strategy must be fair and even-handed
Despite it being more than 14 years since Bitcoin launched, many governments still have little idea how to regulate the sector. That is perhaps why the G7 group of rich nations is reportedly teaming up to adopt a coordinated approach to regulation.
As a company, we back sensible regulation that improves transparency and safeguarding while encouraging healthy competition and allowing the sector to continue to innovate. We also see the benefits of trying to introduce one set of harmonized rules across a number of developed markets.
However, we hope that the governments of Canada, France, Germany, Italy, Japan, the United Kingdom and eventually the United States – not only some of the world’s largest economies, but also some of the most important markets for crypto – take a fair and even-handed approach.
For us, the European Union has managed to achieve that with its Markets in Crypto-Assets (MiCA) regulation, even if there are some concerns about what the EU’s approach means for stablecoins. We believe this should form the basis of the G7’s work as it tries to strike the right balance between safety and innovation.
We’re only scratching at the surface in terms of blockchain’s potential
The potential for blockchain is immense, we know that. A new report adds weight to that argument, predicting that blockchain technology will grow at a compounded annual rate of more than 67% until 2028, when the sector will be worth $71 billion.
While that is an impressive rate of growth, it feels as though we are only scratching the surface of blockchain technology. A few years ago, only forward-looking companies were alive to the potential of this nascent new technology. However, these days there isn’t a mega-cap or large cap TradFi firm out there that isn’t trying to work out what their blockchain strategy should look like, if they haven’t already.
We think tokenization of assets is the last frontier of mainstream adoption. Bringing real world assets on chain could expand the DeFi ecosystem even beyond the $71 billion figure in Research and Markets’ report.
Tokenizing real world assets will not only enable more people to access these assets, but they can be mobilized in a way that the traditional systems do not allow us to do. This will blur the lines between consumers and investors – or ‘Insumers’, if you like. For example, imagine a world where people pay for their morning coffee by lending against their Starbucks stock.
There will be use cases for this technology that have not been imagined yet. Like with the internet, only when more people access and use blockchain, will the real innovation begin.
