Abra Joins $152 Billion Stablecoin Market On Its Way To Becoming A Bank

view original post

Abra, the crypto brokerage that’s seeking to register as a bank, is jumping on the consolidated stablecoin bandwagon, following the route taken by Binance.

Bill Barhydt, the company’s CEO told Forbes that it is planning on “consolidating all the stablecoins under one in the coming weeks,” with that one being its own newly launched USD-A balance.

Abra’s USD-A will “automatically move” among other stablecoins to get customers the best price relative to the dollar, says Barhydt. The company lists several of the top stablecoins by market capitalization, including tether, USD coin (USDC), Binance USD (BUSD), true USD (TUSD), pax dollar (USDP) and dai.

Stablecoins, as the name indicates, are not meant to fluctuate at all, with all the major ones at least theoretically pegged to the U.S. greenback on a one-to-one basis and backed by various kinds of collateral. But they can vary by small amounts–and as the collapse of terra showed, sometimes by very large amounts–so the consolidated strategy provides something akin to arbitrage to get the best price. Customers deposit and withdraw the coins of their choosing under the system.

Abra, which earlier this year partnered with American Express AXP to launch the first crypto rewards credit card, says its consolidation of stablecoins is part of the process of registering as a state-chartered bank. Among the firm’s product offerings, including lending, staking, borrowing as well as buying/selling crypto, Barhydt says the combination of services “starts to look and feel more and more like a bank.”

“That’ll set us up [to] treat these stablecoins like real cash for your salary,” he added.

Abra is following in the steps of Binance, which announced it would delist three rival stablecoins—USDC, USDP and TUSD—and convert them into the company’s own stablecoin, BUSD. The coin’s daily trade volume jumped 56% to over $6.5 billion following the news in early September, with its market capitalization reaching $21 billion today. BUSD is the second-largest stablecoin by volume traded, with about $10 billion traded in the last 24 hours.

MORE FOR YOU

The $152 billion stablecoin sector is largely dominated by the top three coins—tether, UDC and BUSD—and makes up about 16% of the cryptocurrency market, currently valued at $952 billion, according to Nomics.

Unlike Binance, who’s stablecoin BUSD was started in September 2019 and held a market capitalization of $19 billion before the announcement earlier this month, Abra will not be delisting other stablecoins or consolidating under its own coin. Rather, it plans to aggregate customers’ stablecoin balances, which will be shown as a single position under the USD-A name.

All stablecoins, except for tether which Barhydt says Abra will treat differently because “it’s just its own thing,” would be part of this new centralized position. Tether’s reserves have been questioned by U.S. courts as a 2019 class-action suit alleged the company manipulated the crypto market by issuing unbacked USDT. A judge ordered Tether on Tuesday to prove what backs its stablecoin.

Barhydt says he believes that centralized stablecoins benefit customers. “You don’t have to worry about the differences in liquidity across stablecoin pairs,” he says. USD-A will be used for earning interest as part of the Abra Boost program, the rebranded Abra Earn that allows customers to earn interest on their cryptocurrency holdings, and the currency received when borrowing against all other coin offerings, he adds.

Though Abra’s assets under management peaked during November 2021 at $2 billion, the market downturn has brought them down. Barhydt says they remain at “over $1 billion across lending, trading, and funds.” The firm’s key rewards program, CPRX, was also halted in June due to low liquidity, according to a company blog post, with plans to resume in late 2022.

Stablecoins have come to the attention of U.S. lawmakers. The House of Representatives is considering a bill that would put a two-year ban on the algorithmic varieties similar to terra.

Still despite the likelihood of increased regulation, Barhydt is bullish on stablecoin usage, telling attendees at SALT New York conference this month that he’s “hoping stablecoins win versus central bank digital currencies” for mainstream adoption of cryptocurrency.