Digivault, part of the Eqonex Group (NASDAQ.EQOS), has produced its first stablecoin called Poundtoken.io, which is entirely backed by the Great British Pound.
There are two generally accepted types of stablecoins. These are stables backed by some variety of existing commodity like the United States dollar, Canadian dollar, or gold or silver, and there are algorithmic stablecoins like the failed Terra-Luna stable.
The reason Terra-Luna failed was baked into the function of the coin. Terra was tied to its own stablecoin UST, or LunaUS, which is a USD backed stable tied directly to the price of Terra courtesy of a smart contract.
If UST were to deviate from the $1 mark, it would trigger a smart contract wherein actors would either buy, sell, or burn, a sufficient amount of its sister coin, LUNA, to re-balance UST back to a dollar. Unfortunately, the overall cryptocurrency market downturn saw independent investors not attached to the project sell their LUNA, thereby triggering the contract and sending UST spiralling.
UST eventually untethered completely from the United States dollar, and LUNA was left adrift. The algorithm didn’t work and became one of cryptos biggest failures, spearheading the descent into what many are calling another crypto-winter as other projects followed suit as depleted investor confidence caused a mass selloff.
The Poundtoken.io isn’t an algorithmic stablecoin.
Instead, it comes at a time when market volatility and liquidation events are driving investors to regulated stablecoins to protect their portfolios and store wealth during the crypto winter.
The coin was launched at London’s Fintech Week. The poundtoken (the ticker for which is GBPT) is issued by blackfridge, which is an Isle of Man-based fintech company, and allows for direct GBP access to digital asset markets with frictionless settlements in real time.
“We were impressed by Digivault’s digital asset custody that integrates physical and virtual security, and we know the holders of poundtoken will be too. Through this partnership, we can now recommend to our clients a powerful custodian that combines multiple layers of protection, eliminating the need for trust in a single person or group of people. As part of a Nasdaq-listed group, Digivault is accountable to the SEC, as well as to the FCA through its registration. We are looking forward to a long-term relationship between our two companies,” said Michael Crosbie, chief business officer at poundtoken.io.
The problem with a lot of stablecoins is that the companys behind them aren’t accountable to anyone. For example, we have Tether and its parent company, iFinex. Tether presently has a market capitalization of $66,085,641,882, which the company claim to have in store. Except it’s mysteriously out to lunch in perpetuity whenever an auditing firm shows up to verify their holding. This has caused some controversy in recent years, and Letitia James, the Attorney General for New York State, has effectively suspended trading of Tether in the state due to a mix of an unrelated case in which a third party firm absconded with hundreds of millions of dollars of investors money, and the reality iFinex, the company behind Tether, couldn’t back up its collateral claims.
The company has since changed its tune and now claims to be able to back up their market cap through a mix of cash, assets, bonds and other assets of varying liquidity.
Poundtoken isn’t like that. The company guarantees that holders can redeem their GBP at any moment, with one pound sterling backing every GBPT issued. The company has brought in KPMG as auditors, whose monthly proof of reserve attestations will confirm that all issued tokens are 100 per cent backed.
“We are delighted to partner with a company that has the same commitment to regulation and transparency as we do. Poundtoken.io is launching at a time when UK investors are looking closely at their stablecoin portfolio to ensure that their assets are liquid and safe. Poundtoken’s 100% backed and monthly attestations with a big four accountancy firm will give comfort to those investors and we believe it will fuel demand for the first British-Isles regulated GBP stablecoin,” said Robert Cooper, CEO at Digivault.
Part of the deal has Digivault offering holders secure custody in the UK using both of its cold and warm storage solutions. Holders can choose to hold their tokens in vaults, which securely keep private keys as well as assets like metals, rare gems and fine art, or protected by government-grade data diodes housed inside the most physically robust data centres in the UK.