What are Stablecoins?
As per Adam Hayes, stablecoins are digital currencies whose price is anchored to that of a stable value asset, such as a fiat currency or a commodity. Stablecoins aim for price stability by holding reserve assets as collateral or by using computational algorithms that are meant to regulate supply.
Stablecoins offer lower transaction costs and ease of payments, especially in cross-border transactions where the traditional banking system and fintech may levy high transaction fees or foreign exchange costs.
For example, Paypal charges 1.9% to 3.49% transaction fees with a fixed fee ranging from 5 cents to 49 cents on online transactions and Venmo charges 3% in some cases for online transactions.
As per research conducted by Bruce Mizrach et al, Tether transaction fees may have an average (mean) of 12.98 USD with a median fee of 3.44 USD. It is critical to note that stablecoins transaction costs may increase exponentially based on the day-to-day transaction activity of the underlying public blockchain, its underlying network usage and increase in gas fees etc.
For instance, as per Ycharts, a data analytics provider, the Ethereum average gas price currently is 19.84 USD as of 21st December 2022. Nevertheless, stablecoins on other blockchains such as TRON and BNB may not have these issues. Further, as the transaction size increases, the stablecoin transfer becomes more lucrative as the transaction fees are dependent upon underlying blockchain gas fees rather than a percentage of the value of the transaction.
Stablecoins can be important for users in a number of ways:
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Price stability: Because stablecoins are pegged to a stable asset, they are less prone to the price fluctuations that are common with other cryptocurrencies. This makes them more suitable for use as a medium of exchange, allowing users to transact with stablecoin without worrying about sudden changes in value.
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Hedging: Stablecoins can be easily converted back and forth between fiat currencies, making them more accessible and user-friendly for those who are not familiar with cryptocurrency. This can make it easier for users to participate in cryptocurrency-based transactions and payments, even if they are not comfortable with the volatility of other cryptocurrencies. For instance, stablecoins are used as a hedge by crypto traders and investors to quickly get into the US dollar or other fiat-denominated stablecoins when the price of Bitcoin or any other cryptocurrency falls or volatility increases. This is comparatively easier and cost-effective than cashing out cryptocurrency such as Bitcoin or Ethereum every time into a US dollar or other fiat-denominated bank account as a hedge against volatility.
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Greater adoption: Stablecoins can help to promote the wider adoption of cryptocurrency by reducing the perceived risk and uncertainty associated with price volatility by providing users with an instrument to hedge against volatility risk in crypto. This can make it easier for users to use cryptocurrency for transactions and payments, which can help to drive greater adoption and use of cryptocurrency in the broader economy.
In my opinion, stablecoins can be an important tool for users looking to use cryptocurrency for transactions and payments, as they offer a level of price stability and ease of use that is not always available with other cryptocurrencies.
How Can Yuan-based Stablecoin Help Users
Yuan-based stablecoins are digital assets that are pegged to the value of the Chinese yuan, which is the official currency of China. These stablecoins can be useful in a number of ways:
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International payments: Yuan-based stablecoins can be used to facilitate cross-border payments and transfers, especially in countries where the Chinese yuan is widely accepted or where there are restrictions on the use of other currencies. For instance, Hong Kong and even Zimbabwe.
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Increased financial inclusion: Yuan-based stablecoins can be used by individuals or businesses in countries where it is difficult to obtain or hold Chinese yuan. For instance, Yuan-based stablecoin can be used for bilateral trade between a company in the USA for paying a Chinese-based manufacturer in Shenzhen.
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Increased efficiency: Stablecoins can be used to facilitate transactions and settlements more quickly and efficiently than traditional methods, such as wire transfers or checks. For instance, an ACH transfer may take upto 5 days for clearing and settlement.
Overall, yuan-based stablecoins have the potential to increase financial accessibility and efficiency, and to facilitate cross-border payments and transfers.
TrueUSD Launches TNCH, a TRON-based Yuan Stablecoin
The TrueUSD team has introduced a new stablecoin called TCNH that is 1:1 tied to the Offshore Chinese Yuan (CNH). Customers will be able to purchase, keep, and trade TCNH on TRON, one of the most rapidly expanding public blockchains.
The TCNH stablecoin is anchored to the Offshore Chinese Yuan (CNH). Offshore currencies are defined as those that are held and exchanged outside of the issuing nation yet are not subjected to the financial legislation of that country. They are often used in international trade, investments, and settlements. The TCNH network is reliable and open. TCNH, like other TrueUSD offerings, has been thoroughly audited by some of the best accounting firms in the world to ensure it abides by all applicable legal and technical criteria.
Vested Interest Disclosure: The author is an independent contributor publishing via our
The tens of millions of TRON blockchain users now have a new choice thanks to TCNH. It's the most recent example of our efforts to bring fiat currency online and strengthen ties between the crypto and real-world economies.
What is TrueUSD?
TrueUSD (TUSD) is the first digital currency backed 1:1 with USD that has live on-chain attestations from impartial third-party organisations. As one of the leading accounting companies in the United States, Armanino provides real-time certification that TrueUSD maintains a 1:1 ratio between its USD reserve and its circulating token supply, as well as a 100% collateral rate. The audit reports are always accessible on tusd.io, the official website, for users to peruse.
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Image credits: Eric Prouzet, jamable chan and jean beller.