Does a stablecoin launched by a bank make sense?
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A few days ago, Societe Generalethe fourth-largest bank by market capitalization of eurozone banking groups, has announced it has launched its own stablecoin pegged to the euro. The initiative is promoted by its own SG Force, or the division in charge of exploring the cryptocurrency sector.
The stablecoin in question is called EUR CoinVertible (EURCV)a stablecoin pegged to the value of the euro. It is a virtual currency that is it rests on the Ethereum blockchain.
This is the first stablecoin launched by a financial institution, but does it really make sense?
What is a stablecoin
A stablecoin is one cryptocurrency designed to maintain a stable value, generally pegged to the value of a traditional currency such as the US dollar or the euro.
This is usually accomplished through the use of mechanisms such as holding back an amount of traditional currency or other cryptocurrencies as collateral for the stability of the stablecoin’s value.
Stablecoins are used to protect traders and investors from cryptocurrency market volatility, allowing them to have a more stable and reliable alternative to traditional cryptocurrencies such as Bitcoin or Ethereum. Furthermore, stablecoins can be used to facilitate transactions between different cryptocurrencies and to make payments without having to resort to traditional currencies or financial intermediaries.
By their definition, therefore, they make sense when connected to a blockchain, as cryptocurrencies, and therefore also decentralized.
However, this is missing since, in the case of Société Générale, it is a financial institution.
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Surely a stablecoin pegged to the euro could be used as a way for the bank to increase efficiency and reduce transaction costs and to reach new markets or to offer innovative services to customers.
On the other hand, however, the concept of decentralization disappears for which cryptocurrencies such as Bitcoin or Ethereum were born, i.e. as coins not controlled by any financial institution or any government authority.
The other stablecoins pegged to the euro
They exist anyway many other stablecoins pegged to the value of the euro, although less in comparison to all those that exist linked to the US dollar.
Stasis, for example, is a blockchain platform that issues and manages the stablecoin EURS (Euro Token), a cryptocurrency that replicates the value of the euro.
The EURS stablecoin is pegged to the euro at a ratio of 1:1, meaning that for every EURS token issued, there is an equivalent euro value held in a depository bank. This allows users to use the cryptocurrency as a digital alternative to the euro, with a stable and predictable value.
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Stasis uses blockchain technology to guarantee the transparency and immutability of EURS transactions, making them traceable and secure. The platform also supports conversion between EURS and other cryptocurrencies such as Bitcoin and Ethereum.
Stasis was founded in 2017 with headquarters in Malta, and is regulated by the Malta Financial Services Authority (MFSA). The EURS platform has gained popularity among investors and traders looking for a stable and secure alternative to traditional cryptocurrencies, which are often characterized by high price volatility and uncertainty.
With regard to the launch of the Societe Generale stablecoin, the CEO of Stasis, Gregory Klumov, commented:
“We have seen similar attempts before. Many companies are joining the stablecoin race, trying to take advantage of this elusive opportunity by presenting risky products with misleading claims. But not a single commercial bank-issued stablecoin will ever find a product-market, as none of the external customer circle will be comfortably associated with it because of the single point of failure problem.”
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