Choosing Stablecoin: Part One

How to use all the benefits of crypto without volatility risks? Just set your eyes on stablecoins.

Today we have only collateral-backed stablecoins at the centre of attention. The value of such tokens is tied to real-world assets (dollar, euro, gold, bonds) or other cryptocurrencies. The most well-known “stable” cryptos of that type are Tether (USDT), USD Coin (USDC), DAI, and Binance USD (BUSD). In this article, we will highlight things to pay attention to when choosing the right stablecoin.

Company behind stablecoin

The first thing you have to do is visit the site of the company that issues chosen stablecoin — just google “stablecoin name+issuer”. Learn as much info as possible. Choose well-known and reputable names in the crypto industry. Consider not only the brand but the company’s business model. For example, Tether makes a profit solely by minting its stablecoin — USDT. Meanwhile Binance, apart from issuing BUSD (in partnership with Paxos), also offers a wide range of crypto services.

Jurisdiction

Pay attention to the issuer’s business address. Study the legislation covering crypto in the country where the headquarters is located and choose more crypto-friendly options. To illustrate, USDC and BUSD fall within the USA jurisdiction (where crypto is going through hard times), and USDT within — more neutral — Hong Kong.

Regulations

This factor is closely linked to the previous one. Get to know more about crypto regulations in the chosen jurisdiction. Due to their fiat-tied nature, stablecoins are more “controlled” than other cryptocurrencies. On the one hand, adequate regulation is essential and means more safety for users. On the other hand, regulators may put pressure, for example, force a stablecoin’s issuer to freeze someone’s assets.

Follow these tips to protect your funds — more hints are coming on our next post.