Bitmex Co-Founder Calls For A Bitcoin-Based Stablecoin
Former CEO and co-founder of cryptocurrency exchange BitMex, Arthur Hayes proposed a new stablecoin design with a value pegged to Bitcoin. He called it the Satoshi Nakamoto Dollar (NUSD) or NakaDollar.
The crypto community continues to support stablecoins despite a number of misgivings among global regulators and central banks. However, the vast majority of stablecoins are pegged to fiat currencies.
This new stablecoin aims to remain independent and resist any movement of the US dollar. This proposal comes amid increased scrutiny of the stablecoin among US regulators.
Newly Proposed Bitcoin Stablecoin to Weather US Dollar Movements
Under Hayes’ proposal, the new stablecoin will be pegged to bitcoin instead of the dollar. Its value will be fixed at $1 in Bitcoin and an inverse perpetual swap of Bitcoin against the US Dollar. In a blog post titled “Dust on Crust,” Hayes explained why he proposed the Satoshi Nakamoto Dollar (NUSD).
In contrast to several dollar-backed stablecoins such as USDC and USDT, Hayes’ proposed NakaDolla will not rely on dollar reserves. It will rely exclusively on derivatives exchanges with net inverse perpetual swaps on its platforms.
Hayes mentioned that the stablecoin would be based directly on short BTC positions and USD inverse perpetual swaps. This would allow maintaining a 1:1 peg with the USD through a mathematical transaction between participants and derivatives exchanges authorized by the new decentralized autonomous organization, NakaDAO.
Furthermore, the creation of the new stablecoin NakaDollar would be independent of any USD movements requiring banking services. In other words, the new stablecoins would not share connection with fiat banks.
In Hayes’ words, using NUSD would eliminate the need for a USD bank transfer to the cryptocurrency seller when purchasing cryptocurrencies. This would completely separate stablecoins from dollar price fluctuations. He also noted that the proposed NUSD stablecoin would not be decentralized.
Crypto industry seeks alternatives to US dollar-pegged stablecoins
This development comes amidst several depressing news and market downturns in the crypto space. One of them is the liquidity crisis of US-based crypto bank Silvergate, which recently to switch off and plans to liquidate its business. The shutdown came after the New York Department of Financial Services ordered Paxos Trust to cease issuing Binance USD.
Binance USD (BUSD) is one of the largest dollar-pegged stablecoins in the cryptocurrency market. Paxos held deposits with several banks, including Silvergate and Signature. Now that dollar-pegged stablecoins are apparently under the purview of regulators, the crypto community has started to consider other options.
One of the industry’s leading names has also supported gold as an alternative to the dollar by pegging stablecoins. Earlier, Binance CEO Changpeng Zhao (CZ) said that the crypto industry would likely start using other fiat currencies, including the euro, yen, and Singapore dollars, as stablecoins.
The head of Binance said this during a February 14 Spaces on Twitter event while answering questions about the cryptocurrency industry using gold as a stablecoin instead of the US dollar. CZ agreed that using gold makes sense. However, most people’s spending is still in fiat currencies.
Because of this, many people calculate their investment returns in dollars, making US dollar-backed stablecoins a vital part of the crypto industry.
Featured image from Pexels and chart from Tradingview.com