Not a ‘yielding deposit’ currency or a stable coin: Agora van Eck

Stablecoin providers offering passive income to holders are missing the point of Stablecoin's core mission, argues Nick van Eyck, CEO of Stablecoin issuing firm Agora.

Instead, these firms should focus on consumption, liquidity and trading methods that reach as many individuals and businesses as possible, explained investment management maestro Jan van Eyck in a May 27 Medium post.

Yielding stablecoins offer a new dimension to decentralized finance users looking to earn interest, but Van Eck said such products could be classified as security products in many countries and therefore limit access to customers.

“Not only does this lose you customers, it also loses you liquidity providers, suppliers and a higher consumption ceiling. Your product is not something that can be sold for free,” Van Eck said.

“Regulated financial services companies outside of the U.S. cannot use your product because it poses a risk without offering adequate rewards.”

Examples include Dai (DAI), Etena USD and Mountain Protocol USDM.

Producing stablecoins also do not have sufficient margins to sustain businesses, let alone to pay for liquidity and expand the ecosystem, Agora's CEO added.

Another major issue is that some stable coin issuers – like Circle with Coinbase and Binance's own BUSD – have developed strong relationships with cryptocurrency trading firms, which Van Eck described as a model “fraught with conflicts of interest” before they began to decline.

Van Eck said Agora will “not pick winners and losers” when it launches Agora's digital dollar (USD) on Ethereum next month in June. Instead, it tries to work with as many cryptocurrency exchanges, businesses and fintech companies as possible.

He describes Tether's USDT as Stablecoin 1.0, with Circle's USD Coin (USDC) and a few issuers expanding on that to establish the Stablecoin 2.0 era with improved transparency around reserves, banking partners and regulatory compliance.

Van Eck said he hopes AGORA will show its third iteration as a stable coin focused solely on consumption, liquidity and trading methods.

Related: Cardano finally gets fiat-backed stablecoin USDM after big delays

However, Agora enters a strong stablecoin market led by USDT and USDC, which has a market cap of $111.7 billion and $32.5 billion, respectively, according to CoinGecko.

The next seven largest stablecoins have a market value of more than $500 million.

However, Van Eck said in April that there is still room for a new entrant in the $161.3 billion industry, especially for alternative models like Tether and Circle.

Van Eck expects the industry to grow to $3 trillion by 2030, an impressive 70.1% compound annual growth.

Agora closed a $12 million funding round in April.

AUSD is backed entirely by cash, US Treasury bills and overnight repo agreements, which the $90 billion asset management firm Van Eyck – with Jan Van Eyk as CEO – manages for Agora's stock fund.

Journal: Unstable Coins: Debasement, Bankruptcy and Other Risks Looming.