What are stablecoins

Chairman of the Board of the Association of Electronic Money and Money Transfer Market Participants (AED) Viktor Dostov told cryptonewsherald what a stablecoin is and what are its features.

As the expert explained, a stablecoin is technically similar to a conventional cryptocurrency, such as Bitcoin. The main difference is that its rate is pegged to an external asset – the dollar, the ruble, a gram of gold, etc.

According to Dostov, in this way, there is no risk of a strong change in the exchange rate during the payment process, therefore stablecoins are willingly used in settlements. In addition, they are convenient as collateral and for other purposes, he added.

“In the most reliable case, a stablecoin is bought for, say, a dollar from an audited operator, the operator deposits this dollar for a subsequent buyback (minus a small fee). Such schemes are quite reliable if the operator is known and behaves prudently,” he said.

Dostov also said that there are more technological schemes – algorithmic stablecoins, in which there is no audited deposit. They are less reliable, he said.

At the same time, the expert recalled that Russian legislation prohibits payments in any cryptocurrencies.

On February 13, The Wall Street Journal wrote about the ban on the issuance of the stablecoin Binance USD (BUSD) – the New York State Department of Financial Services ordered Paxos Trust to stop issuing new tokens. As BitRiver financial analyst Vladislav Antonov told cryptonewsherald, this news had a negative impact on the crypto market.

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