After the statement from the Office of Comptroller of the Currency (OCC) that federally regulated banks can now use stablecoins for conducting payments including other activities, we can surmise the adoption of stablecoins as the beginning of the modern renaissance.
Before discussing our take on how this letter can bring a world of difference in the payment methods let us first look at the contents of the letter that holds the most relevance, in brief.
- The letter explains that banks may use new technologies.
- These new technologies include independent node verification networks and stablecoins as a method of transaction.
- The chief reason to bring stablecoins into account is to minimize price volatility.
These three points brief the crux of the letter. To put it simply, the use of cryptocurrencies will curtail the price volatility, and thus, the invitation to banks for using stablecoins will undoubtedly bring a revolution and anticipates how the new modes of payment can promote faster and reliable transactions at the same time.
The Stablecoin Solution
Stablecoins Are Fiat Pegged
Stablecoins are pegged with fiat, for example, the US dollar, Euro, Pounds. The value of stablecoin is at a ratio of 1:1. this means the value of stablecoin is in synchronization with the fiat.
It is no surprise that if stablecoins are pegged in one on one with fiat, thus transaction value won’t fluctuate in the time lag of sending and receiving the money.
If we talk about transactions in fiat, then settlement charges of fiat are way higher when compared with the transaction using the crypto stable coins. On estimate, the settlement charges of stable coins are a fraction of the amount charged in fiat.
The Time Factor
If fiat currencies were taken into account, then the time required for the complete transaction to take place using them can go up to 48 hours. While if the transactions were made using digital currency, it will take only a fraction of time when compared with the fiat transaction time.
The Bottom Line
For sure, the adoption of stablecoins is going to change the whole scenario of transactions at many levels. Let it be in terms of time, conversion charges, value fluctuations, or any other.