Agora CEO Advocates for Utility-Focused Approach in Stablecoin Market
Summary:
Agora CEO, Nick van Eck argues that yield-bearing stablecoin providers should be focusing more on overall utility and expanding transaction access instead of passive income opportunities. He believes yield-bearing stablecoins will be categorized as security products, limiting customer reach, and reducing sustainable business operations. van Eck anticipates launching Agora's digital dollar (AUSD) next month, aiming to work with as many exchanges and fintech firms as feasible. Despite market dominance by USDT and USDC, van Eck believes there's room for a newcomer like Agora that offers an alternative framework.
Nick van Eck, the CEO of stablecoin creator Agora, argues that stablecoin providers offering a yield-bearing facet that allows stakeholders to earn passive income are neglecting the fundamental objective of stablecoins. Instead, he suggests that these companies should concentrate on transactional utility, liquidity, and reaching as many individuals and businesses as attainable. This view was outlined in a blog post dated May 27. Although yield-bearing stablecoins provide an additional feature for decentralized finance users, van Eck foresees that these types of products will be recognized as security products in many countries, hence limiting their customer base.
Drawing from his viewpoint, he maintains that the constrained acceptability hinders liquidity providers and vendors, thereby limiting its broader utility. According to him, regulated financial institutions situated outside the US will be hesitant to adopt these products due to the absence of adequate incentives. Representative examples of yield-bearing stablecoins include Dai (DAI), Ethena's USDe, and Mountain Protocol's USDM. These stablecoins, according to the CEO of Agora, fail to provide enough profit margin to sustain operations and facilitate ecosystem expansion.
Van Eck further identifies a problematic trend in which some stablecoin providers form strong associations with cryptocurrency trading firms such as Circle, Coinbase, and Binance's BUSD, creating potential conflicts of interest. Looking ahead, van Eck assured that Agora, set to launch its Agora digital dollar (AUSD) on Ethereum in June, will maintain impartiality and welcome collaboration with numerous cryptocurrency exchanges, trading firms, and fintech companies.
Comparatively, he labels Tether's USDT as the first generation of stablecoins, with subsidiaries like Circle’s USD Coin (USDC) further improving the model via enhanced transparency measures. He envisions AGORA as the third wave of stablecoins prized for their utility, liquidity, and transactional ability.
Notwithstanding, Agora is entering a highly competitive stablecoin marketplace, where USDT and USDC dominate with market valuations of $111.7 billion and $32.5 billion respectively. Despite acknowledging this competitive atmosphere, van Eck expressed optimism in April, declaring the potential for a new entrant that offers an alternative framework to incumbents like Tether and Circle. He projects the sector will swell to a hefty $3 trillion by 2030, with an astonishing compounded annual growth rate of 70.1%. To prepare for this expansion, Agora amassed $12 million in funding in April. The AUSD, designed by Agora will be fully underpinned by cash, U.S. Treasury bills, and overnight repo agreements.
Published At
5/28/2024 3:30:11 AM
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