• Sovryn, a Bitcoin DeFi protocol, announced a new dollar proxy as others look at alternative models for collateralizing stablecoins amid a banking system crisis.
• The U.S. government is pledging to backstop all deposits of two failed banks and secure 8% of the collateral for USDC stablecoin.
• BitMEX co-founder Arthur Hayes proposed NakaDollar (NUSD), a stablecoin backed by bitcoin and bitcoin derivatives, which would theoretically provide stability if accepted and used by investors and crypto exchanges.
Overview
In response to the banking crisis, several companies have looked into different models for collateralizing stablecoins such as the USDC of Circle or the proposed NakaDollar (NUSD) from BitMEX co-founder Arthur Hayes. The U.S. government has pledged to backstop all deposits of two failed banks and secure 8% of the collateral for USDC stablecoin, while NakaDollar (NUSD) will be backed by bitcoin and bitcoin derivatives in order to potentially provide stability if accepted and used by investors and crypto exchanges.
Sovryn’s Dollar Proxy
Sovryn, a Bitcoin DeFi protocol, recently announced a new dollar proxy that allows users to use their BTC holdings in ways they previously could not with other protocols. This new model provides an alternative method of creating a more secure form of digital money that is backed by cryptocurrency assets instead of traditional fiat currency reserves held in bank accounts.
The Government Bailout Plan
When the U.S Treasury Department, Federal Reserve, and FDIC announced plans to backstop all deposits at two failed banks this week, they were also pledging to secure at least 8% of the collateral for the USDC stablecoin issued by Circle; Circle keeps around a quarter of USDC’s reserve assets at about six banks. With these measures in place, it should ensure that USDC remains pegged to its corresponding currency value without any depegging issues as seen over the weekend when Circle had to take emergency measures due to depegging concerns with USDC.
BitMEX’s Proposal For NakaDollars
Arthur Hayes, co-founder of crypto exchange BitMEX has proposed NakaDollar (NUSD), a stablecoin backed by bitcoin (BTC) and bitcoin derivatives which he believes would be deeply liquid enough for traders while also providing stability if accepted and used by investors and crypto exchanges alike. As discussed on “The Hash” podcast episode featuring Hayes‘ proposal, it will remain interesting to see how this idea develops further as well as its potential impact on future decisions within the industry regarding cryptocurrencies including stablecoins going forward into 2024 or beyond depending on its success rate amongst users/investors etc..
Conclusion
Stablecoins are becoming increasingly popular alternatives for digital currencies but can still be volatile due to external factors such as banking crises & other forms economic instability; however with initiatives such as those mentioned above like Sovryn’s dollar proxy & BitMEX’s proposed NakaDollar (NUSD) in addition to backing from U.S government institutions like FDIC & Federal Reserve etc., we may soon see increased stability within these coins which may lead them towards being even more commonly accepted than before now & into 2021 onwards – only time will tell!