Tether is adding to its range of stablecoins with GBPT pegged to the British pound sterling. Will this help restore trust in stablecoins?
Stablecoin stalwart Tether has announced that it will launch a GBP pegged stablecoin – GBPT – in July 2022.
The new coin will join its US dollar-pegged USDT, Euro-pegged EURT, Chinese Yuan-pegged offshore CNHT, and Mexican peso-pegged MXNT.
Stablecoin concerns persist after TerraUSD collapse. But Tether continues to push and has chosen to set its sights on the UK.
A GBP pegged stablecoin
Stablecoins are a type of cryptocurrency whose value is tied to an asset such as the US dollar in an attempt to stabilize the price.
Cryptocurrency prices are notoriously volatile, but the goal behind stablecoins is that by bringing their value closer to fiat currency (or other assets such as gold), crypto investors have an option that can help them avoid some of the extreme price swings.
Tether’s stablecoin GBPT will be pegged 1:1 to the British pound and will start out as an ERC20 token on the Ethereum blockchain.
Until now, the stablecoin market has been largely focused on the US dollar. Tether’s decision to launch a GBP-pegged stablecoin suggests UK appetite is growing.
Tether CTO, Paolo Ardoino, said: “We believe the UK is the next frontier for blockchain innovation.”
The UK Treasury has announced plans to make the UK a global cryptocurrency hub. This will involve bringing stablecoins into its regulatory framework and could eventually include allowing stablecoins as a form of payment.
The future of stablecoins
It’s been a tough road for stablecoins over the past few months and many remain concerned about their place in the crypto market. The collapse of the Terra blockchain sent shockwaves throughout the industry and triggered the current market decline.
As a result, Tether’s own market capitalization has shrunk, falling below US$70 billion (about A$101 billion) for the first time since 2021 according to CoinMarketCap.
There are concerns that stablecoins are not as stable as some suggest. But Tether coins are fundamentally different from TerraUSD. Tether and the soon-to-be-launched GBPT token are asset-backed. This means that they are 100% collateralized by cash or cash equivalents such as bank deposits, treasury bills and the like. TerraUSD (now known as TerraClassicUSD) was not supported in this way; an algorithmic stablecoin, it was primarily backed by another Terra token.
However, it will likely take some time for confidence in stablecoins to return. There have been calls for greater transparency on the quality and liquidity of the investments used to back them.
If you are a crypto investor considering stablecoins, it is important to understand that even asset-backed coins still carry a high level of risk. It’s also worth researching how stablecoins are backed and what would happen if one broke away from their fiat currency.
Trying to control the markets? Cut through the noise with our overview of the best cryptos to buy right now, explore some strategies for how to trade cryptos, or see if there’s a better platform for you with our guide to the best crypto exchanges.