MEXICO CITY – There is a government-approved mobile app available that enables 20,000 migrant workers in the US to pay their bills at home using the Stellar network.
That says Marco Montes Neri, the creator of the balance app, which is based on peso-backed stablecoins. “Stellar has created a number of protocols and standards to meet all of these regulatory obligations,” he said, adding:
“If you want to touch real people’s money, you really have to play with regulators.”
This topic came up again and again this week at the Stellar Meridian Conference in Mexico City, which was attended by around 350 participants, most of whom relied on Stellar. The adoption of financial regulations seemed to be a dominant issue; Facebook’s “move fast and break things” wasn’t the mantra.
“Making sure Stellar is useful to real people” has always been the goal, said Jed McCaleb, who created the cryptocurrency in 2014. “That will always come back to some kind of regulatory situation in the end … we are not avoiding it.”
McCaleb now serves as the Chief Technical Officer of the Stellar Development Foundation (SDF) at a time when the race for blockchain-based global payments is becoming increasingly crowded. In 2012, McCaleb co-founded Ripple, which is now focused on cross-border bank transfers, but for the past few months Facebook’s Libra project has put the discussion of crypto transfers under the regulator.
The advantage of Stellar is that it is already there and moving – with a built-in compliance layer just above the protocol itself. This allows users to adhere to a common set of Know-Your-Customer (KYC) and Anti – Money Laundering (AML) standards.
Neri said this makes Stellar helpful to a business like his in ways that Ethereum, for example, doesn’t.
“This level doesn’t exist in other ledgers because it wasn’t the focus,” Neri said. “You can build it, but the problem is that it’s not compatible with another project that wants to do the same.”
Denelle Dixon, CEO of SDF, says she doesn’t just want to help people cope with regulations; She wants to go to rule makers and show them how blockchain technology is making the world more orderly. Said Dixon:
“We really need to focus on getting more regulators involved.”
Cole Diamond, CEO of CoinSquare, a crypto exchange in Canada, told the Meridian crowd that “the majority of us walked away and pioneered our regulators.”
Diamond said his company actually left a lot of money on the table by leaning against his province’s laws. When the Canadian exchange crashes, he doesn’t regret it.
“I cannot stress the importance of doing this enough,” said Diamond.
Pavel Matveev of Wirex, a global crypto-to-fiat asset transfer startup, told the assembled Stellar fans, “It’s actually pretty risky not to be regulated.”
Although no one has denied that governments tend to be frustratingly slow. Amit Sharma, CEO of FinClusive Capital, which creates a compliance-as-a-service platform, urged the founders to proactively approach policy makers with ideas.
“Because innovation inherently overtakes regulators,” Sharma said.
Hopes are made by Ernest Mbenkum, founder and CEO of Interstellar Wallet and Exchange. “Governments cannot resist this forever,” he said. “At the same time, they want to be able to control it. It’s an interesting dance. “
As the central banks see it
There is one way nation states could embrace crypto with disconcerting ramifications for the industry: by putting fiat currencies on a blockchain.
“When central banks decide to issue a CBDC [central bank digital cryptocurrency], it will be in token form and it will be delegated, ”predicted Francisco Rivadeneyra, a research advisor at the Bank of Canada, on the stage on Tuesday morning. A delegated CBDC means partners help the bank manage consensus and track payments, much like blockchains like EOS and Libra (as currently envisaged).
Linda Schilling, Professor of Finance at the Ecole Polytechnique in Paris, said:
“The rise of cryptocurrencies has in some ways made central banks think about how to compete.”
She believes central banks understand that when a cryptocurrency is introduced globally, it will allow citizens within a nation-state to opt out of a central bank’s policies. Users who could use crypto for a significant part of their economic lives would be shielded from a bank’s plans to control inflation or economic growth.
But when central banks beat crypto companies and start taking on peer-to-peer payments, enormous amounts of data will be accumulated on the ultimate political institutions.
“When you move towards central bank currency, you are moving a lot more towards a business model like Facebook and Google and so on,” she said. Among other things, political officers have far too much information about voters, dissidents and political rivals.
The proposal that most gestured among central bankers was, of course, Libra, the cryptocurrency proposed by Facebook in June.
It just so happens that Libra has basically the same vision as Stellar – speed, low fees, financial inclusion, easy token creation. Subjects that McCaleb’s fans are very familiar with.
“It’s fair and fair to say that all of the noise related to the scale had a negative effect,” said Matveev, Wirex CEO.
For his part, McCaleb told CoinDesk that he thinks Mark Zuckerberg and his Libra lieutenants don’t really understand what they’re getting into.
“Your approach seems a bit arrogant, at least from the outside. The way they announced it seemed a bit premature. “
McCaleb said that Libra doesn’t look decentralized enough to him and he doesn’t think the founding partners will ever fully decentralize them, although he admits he has a bias there. Libra is trying to build essentially the same global payments network that SDF has already built.
But Mbenkum, the founder of Interstellar Wallet and Exchange, argued that Stellar’s advantage for reaching the non-banks does not lie in its XLM cryptocurrency. Rather, it is the system of “anchors”, the Stellar jargon for companies that manufacture asset-backed tokens in the network.
“Stellar, Bitcoin, this is the first wave. The next wave is asset-backed tokens, ”said Mbenkum. He sees huge potential in countless new tokens based on real material. People in emerging markets don’t understand abstract things like cryptocurrencies, Mbenkum said.
“People understand tea. People understand yams, ”he said, and they will understand something that promises future shipments of such products. “Here the world moves in emerging markets,” he said.
McCaleb is also hopeful, although he knows progress is slow. He pointed to Balances peso-backed stablecoin and another anchor in Nigeria that is slowly building a following by helping people deposit and withdraw money.
McCaleb seemed actively reluctant to outbid anything, but he offered this:
“It seems like we’re on the cusp of doing these things that are actually making people’s lives better.”
Stellar Development Foundation Senior Strategist Lisa Nestor and Stellar Founder Jed McCaleb speak at Meridian 2019, photo by Brady Dale for CoinDesk
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