The CEO of tokenization platform Stasis says that cryptocurrency adoption can happen through the creation of coins that are easy to explain, easy to test and easy to use. Lowering the bar on overly complex instruments is one of the keys to getting traders on board.
Says Stasis CEO Gregory Klumov,
“If you can’t explain what Bitcoin is to an average user who has no significant knowledge in finance or tech, how can you explain an algorithmic stable coin?”
Part of the barrier to entry appears to lie in complexity. Basis, a stablecoin project that raised millions of dollars in venture capital, ran into recent roadblocks with regulators. According to Bain Capital Ventures’ lead investor, the Basis co-founders opted to shut down the project and return their investment capital when efforts to meet regulatory compliance proved too difficult.
Speaking at November’s BlockShow Asia in Singapore, Klumov says that the instruments that are the most enticing are the simple ones.
“Stablecoins should be something really simple for an end user. A stablecoin should be something you can explain to your mother or your grandmother – how it works. Without that, you won’t be able to get widespread adoption. With algorithmic guys, they create fancy algorithms that might work for academics or finance people but they will not work for the general public.”
Klumov, whose company tokenizes fiat, says economic incentives that build on known entities will drive the greatest adoption, rather than newfangled products.
“My strategy is to take an existing business model and make it ten times better. Even when I was a hedge fund manager, I preferred private equity growth where you take something that works and you scale it. Statistically that’s the best strategy to invest. With fiat, we didn’t invent it. We see with Tether that it worked, and we made it ten times better.”
The company’s tokenized euro, EURS, is designed to be used by institutional investors and asset managers who want to try crypto.
“So they use the euro as a base currency. They purchase EURS as the first step to move into crypto. They move it around and exchange it to some other crypto and understand how fast and secure it settles. Then they move to more complex digital assets, like project or blockchain tokens.
You can also use EURS not just to enter but to exit the crypto markets too. If you want to report your profit or income, you exchange your digital assets into EURS tokens and then you can legally put it on the balance sheet.”
Making a leap from a fiat-based economy into a cryptosphere where people are doing business peer-to-peer is a mythical illusion, according to Klumov.
“Obviously we need more institutional investors involved. We will not escape any kind of system where institutions will be exempt from the chain of financial services or where a small shop will escape being serviced by an institution. We need to get them to settle together with the same asset.
Before this retail adoption comes, we’re seeing the experiments. MAS (Monetary Authority of Singapore, the central bank) experimented to settle value and margin on blockchain. This is a huge use case where institutionals trade against each other. Derivatives like futures, options like FX – they need to settle margins fast. So digital assets are the perfect tool to settle margin. Institutional traders will propel crypto platforms because they’ll gain a competitive advantage.”
Beyond euros, he says Stasis will be experimenting with other currencies: Korean won, Australian dollar, maybe even Japanese yen.
“Since the digital asset market is pretty original, due to the fact that it requires the young generation and internet penetration and smartphone adoption. So I think countries like Turkey will trade in euros and then in dollars, but countries like Korea might have their own Korean won.”
The adoption of stablecoins, and cryptocurrencies in general, will also require a robust regulatory framework. Clear policies will allow stablecoin usage to spread and more blockchain-based projects to flourish. Stasis, which acts as a consultant and strategist for Malta’s National Blockchain Task Force on crypto regulation, is also working to develop a regulatory framework for Cyprus.
The market is dynamic, competitive and wide open with no one project or vision showing a quantum leap over another. Even Bitcoin, with its first-mover advantage, numerous forks and 10-year-old technology will have to continue to prove itself as viable, robust and fast in order to maintain the leading edge from its global brand recognition.
Klumov believes Stellar currently has the leading edge over other crypto platforms designed as payment railways.
“Stellar has a correct approach in terms of payments. But it’s very hard to make predictions here. It’s like discussing in year 1990, what is better: yahoo.com or altavista.com. Who will win? Back then, you didn’t know that Google will dominate and you also didn’t know that Amazon will sell not just books but everything. So we are blockchain agnostic. Right now I can explain to clients that Ethereum is the most secure blockchain to tokenize assets but when another blockchain shows up that is more secure and I can measurably compare that, I’ll switch.”