Key Highlights
- There is a huge demand [for stablecoins] out there. When we look at the global economy, we’re suffering as a result of the US-China trade wars. The trade fluctuations this year have been defined by this growing tension between the US and China. Stablecoins are something that people inevitably will look at.
- We’ve created a currency that is pegged to global economic growth, which has been growing for the last 30 and more years. And not only has it been constantly growing, but it is bypassing inflation, and it has a growth average of 0.4-0.5% for the last 30 years.
- We created an index that’s very similar to the index of IMF. The only difference is the IMF created the index I think in the 1960s, and it’s not available to the world. It’s only available to a few member countries of the IMF. We created a similar index and we called the index the monetary measurement unit (MMU), which indicates and gives us, pretty much, a unit of measure [for money], just like any other units of measure.
- We created an index and we’re looking at the average GDP for the last 25 years. So […] we’re taking the data from 190+ countries, and we’re crunching the data together year by year for the last 25 years, and we come up with an average. […] On top of that, we throw in so many other things like FX indicators and so forth.
- We are pegging our Anchor to [the MMU index]. And actually, that’s what gives us the heartbeat of the global economy growth. It gives us this unit of measure for money.
- [A pegged global GDP stablecoin] would help bypass this recession. Pretty much want a global GDP-pegged stablecoin would do, it would preserve value over a recession over a volatile market. So investors and hedge funds would find it very attractive to park and to use it in these times of turmoil.
- At the end of the day, we need a safe harbor. And traditional traders are increasingly seeking out crypto investments. But at the same time, everybody is at the point where they’re saying, “We do need a safe harbor.” Unfortunately, volatility remains an outstanding issue for crypto investors. That’s this safe harbor for the assets. And looking at the bitcoin price gap from just the last three months […] there’s even more proof that the need is here. Let’s hope that this market this year is bringing all these stablecoins out here. Not many fiat currencies can compete with that level of short-term viability that crypto stablecoins will bring to the table.
- This is the year of stablecoins. This is the year where governments are looking at crypto very seriously. If this thing was like a year ago or two years ago, it was like, overseen, or you know, a lot of people invested. Now you have governments that are saying, “Hey, we need to regulate this thing.” And that, to me, is very positive.
Listen to the podcast
A month ahead of the launch of Anchor’s stablecoin, its founder and CEO Daniel Popa sits down with our Editor-in-Chief Angie Lau to discuss why the world needs a two-token stablecoin pegged to the global economy — not the traditional US dollar peg — especially at a time where recession looms over investors’ heads.
Since 18 months ago, Popa’s team of economists and blockchain developers sought out to create an index named the monetary measurement unit (MMU) to peg the Anchor currency to. The index itself, according to Popa, is a culmination of 190+ countries’ average GDP over the last 25 years, FX indicators, and other factors.
See related article by Daniel Popa
Opinion | Rising U.S.-China Trade War Tensions Highlight Need for a Viable Stablecoin
As stablecoins are designed to minimize the volatility of a cryptocurrency price, Popa argues that pegging his cryptocurrency to the global economy growth would not only bypass inflation, but also bypass the upcoming recession by preserving the currency’s value or purchasing power over the volatile period.
At the end of the day, Popa believes that all investors are seeking a safe harbor, whether it is to hedge their current assets or to invest in an unexplored asset class. As governments and crypto-enthusiasts alike are becoming more aware of this class of cryptocurrency, and that this can potentially bring short-term viability to fiat currencies, Popa is hopeful that this is the year of stablecoins.
Full Transcript
Welcome to Word on the Block, the series that takes a deeper dive into the topics we cover right here on Forkast.News. I’m Editor-in-Chief Angie Lau and today we’re taking a look at the rising US-China trade war tensions. And could this be highlighting the need for a viable stablecoin? Let’s connect right now Daniel Popa, our latest expert contributor who’s opinion piece presents the case that uncertainty in traditional markets has actually benefited the crypto market. Now, Daniel is Founder and CEO of Anchor, AG established in 2018 in Zug, Switzerland.
It’s a two-token stablecoin pegged to a global economic trend story, so this is interesting. But first of all, welcome Daniel, glad to have you on the show.
Yeah, thank you so much, and it’s an honor being on your show.
Wonderful. First, okay, let’s get started.
So a stablecoin is really a new class of cryptocurrency designed to minimize the volatility of the price of a cryptocurrency. Usually, it’s pegged to either a cryptocurrency sometimes US dollar or other fiats sometimes even in ETF. But really if you think about it, it is to minimize the volatility of that coin. In effect, stablecoin.
Let’s talk about one of the most volatile cryptocurrencies and still consider the most stable: Bitcoin. Everybody knows it, but the price fluctuations really underscore this short-term volatility that you’re talking about. We saw a low of US$5,100 in May to a high of US$12,500 in July. If that’s stable… And when it comes to cryptocurrency, that is not necessarily realistic. So when you say stable, it’s got to be pegged to something. Now, a lot of stablecoins are being pegged to the US dollar. But is that the only option out there?
Well, it’s not the only option, that’s what we’ve been working for. And what you just mentioned is the difference within three months in Bitcoin is at US$7,000 plus difference. But you know what, that’s not exactly like… if you’re putting it like this… I’m sorry, that’s not the only solution. So there’s another peg out there and that’s what we’ve been working for and we’ve been working on this peg and we’re tagging our anchor token to the global economic growth, to the global economy. And this is completely a different approach than any other stablecoin out there.
How would you use a stablecoin, like in real life adoption? How would you use a stablecoin, first and foremost? Before we talk about how it’s pegged to anything.
Yes, so before we even go there, a stablecoin… I mean, stablecoins are used even today. There’s a lot of stable points out there on the market right now that are pegged, you know the majority are pegged to the US dollar or other assets, but people are using it. The stablecoin market — it’s something at about 9 billion per day transactions right now in the crypto which is huge.
So people are using it and people need stable coins to hedge against fluctuations and market drops and so many other reasons that people use stablecoins to onboard different fiats and other things that are out there in the market. And there are so many reasons that people use it. And the amount it’s used at, it’s huge.
Well, it brings us to your article which is currently the volatility that we speak of, not necessarily is in currency markets, but it’s in the macroeconomic environment. We’ve got the US-China trade wars, we’ve got the central banks worried about a global recession and enacting monetary policy to reflect that. What is the state, right now, of the global economy? And why do you think this environment right now is really ushering what you’re seeing as a new demand potentially for stablecoin?
Yes, there is a huge demand out there. When we look at the global economy, we’re suffering as a result of the US-China trade wars. The trade fluctuations this year have been defined by this growing tension between the US and China. And stablecoins are something that people inevitably will look at. And they already do look at it.
The trading deficit is part of the US administration strategy to create jobs, but at the end of the day, this trading deficit has been creating so many other issues and problems around the world. And people are always looking for solutions. And if we look at the solutions that people have found today, one of them is crypto. Crypto is an amazing solution that people are adopting actually, as we speak. People don’t wait, they can’t wait for miracles. And actually this miracle showed up and in this entire crypto industry, stablecoins will play a vital role in the global economy.
Okay, help me understand something. If a stablecoin is pegged to the US dollar, aren’t you, in effect, pegging the value of your coin to US monetary policy? And then, why would that be any different?
Exactly. And to the law, essentially, to the inflation, and everything else that is going on there. So if you look at the US dollar as of right now, the US dollar has lost about 50% of its purchasing power in the last 25-30 years.
And there are always pegs to the US dollar. Even though they’re stable in the crypto, they’re losing in value as they are pegged to that fiat currency is actually losing value each year. In other terms, we’ve created a currency that is pegged to global economic growth, which has been growing for the last 30 and more years. And not only has it been constantly growing, but it is bypassing inflation, and it has a growth average of 0.4-0.5% for the last 30 years.
So we’re talking about very, very, very stable solution.
Okay, so you’re saying that you’re pegging to global GDP growth, and you’re saying that people are seeking stablecoins as more of a solution because they want to peg it to global GDP growth. But isn’t in effect, you’re pegging it to the macro? Where the micro might be the US, it might be the Japanese yen, it might be China yuan, but at the end of the day, global GDP growth is a sum of all of those micro-effects.
Yes.
So how does this actually help people? Help me understand there.
Yeah, so in our algorithm, and what we’ve built, actually, we do consider and we are also looking at these countries that you had mentioned actually. On top of the GDP — and GDP is one of the items in a cocktail of about 15 others — but also in our proprietary index that we have created, what we call the MMU, the monetary measurement unit, that we’ve created. In that cocktail, actually, we also look at the top 10 countries and we look at the FX indicators and we’ve created foreign exchange indicators that are actually showing us the heartbeat of the global economy, not just GDP. So we’re talking about a very sophisticated and complex formula that we’ve created in Anchor. When we say it’s a team of PhDs and master degrees in finance and microeconomy.
So the global GDP in 2008 fell 5% post-global financial crisis, right?
Yeah.
So how would a pegged stablecoin to global GDP reflect a similar economic event if this were to happen again? How would a stablecoin that’s pegged to global GDP be a factor?
If you directly peg it to the global GDP, you’d be in great trouble. So you’ll have all these fluctuations and so forth. What we did in our index, you see, we created an index and we’re looking at the average GDP for the last 25 years. So what we’re doing here is we’re taking the data from 190 plus countries, and we’re crunching the data together year by year by year for the last 25 years, and we come up with an average. That’s one. On top of that, then we throw in so many other things like FX indicators and so forth.
So actually what we did was we created an index that’s very similar to the index of IMF. The only difference is the IMF created the index I think in the 1960s, and it’s not available to the world. It’s only available to a few member countries of the IMF. We created a similar index and we called the index the monetary measurement unit (MMU), which indicates and gives us, pretty much, a unit of measure, just like any other units of measure.
And actually, if you look at the world, and this is amazing. If you look at the world, we have a unit of measure for everything except money. We have a unit of measure for meter, kilometer. For a pound, for a kilogram, for liquid… Everything has a unit of measure. You can measure everything in the world except for one thing: money. You cannot measure money. You cannot measure the power of the money. You look at the money today and say well, the majority of people compare money with the US dollar, for instance. But that’s failing every single year. It’s eroding through inflation in its own…
You could measure money in purchasing power, in how much you can actually buy with your unit of fiat. You can measure it in a multitude of ways that the average family does every day.
That’s true, you compare it to the prices that you purchase in and so forth. But at a macro level, there’s not a unit that we could say, “Hey, this is a unit that measures a country’s fiat.” And that’s pretty much what we created. We created this index, what we call the monetary measurement unit (MMU) that we are pegging our Anchor to. And actually, that’s what gives us the heartbeat of the global economy growth. It gives us this unit of measure for money.
Help me understand — and help our audience understand — that if potentially we see another global recession on the horizon, which is very much the conversation that many are having right now. What would a pegged global GDP stablecoin help in real life?
It would help bypass this recession. Pretty much want a global GDP-pegged stablecoin would do, it would preserve value over a recession, over a volatile market. So investors and hedge funds would find it very attractive to park and to use it in these times of turmoil.
At the end of the day, it sounds like it’s an average of each country’s individual volatility. That average creating the least amount of volatility for global financial markets, and or anyone who wants to participate in this specific stablecoin. But at the end of the day we still have countries that are behaving for their own benefit, from the US to China and everyone in between. At the end of the day, how do you really define this kind of GDP global value to the individual? How does that individual get to preserve wealth in what essentially is still a very volatile macro market?
That is a very, very good question. At the end of the day, that’s something that each and every single investor, individual that’s investing asked themselves. And the answer is, at the end of the day, we need a safe harbor. And traditional traders are increasingly seeking out crypto investments. But at the same time, everybody is at the point where they’re saying, “We do need a safe harbor.” Unfortunately, volatility remains an outstanding issue for crypto investors. That’s this safe harbor for the assets. And looking at the bitcoin price gap from just the last three months, like what you mentioned earlier, there’s even more proof that the need is here.
So, let’s hope that this market this year is bringing all these stablecoins out here. Not many fiat currencies can compete with that level of short-term viability that crypto stablecoins will bring to the table.
It’s a promise of a brave new world. But certainly, it is, unfortunately, based on a very rocky foundation that we all find ourselves in, in kind of financially difficult times as we all talk about what potential recessions and in various countries and trade tensions really reveal itself to a global market.
But the final question for you, Daniel: are more and more people — as you see it, even at Anchor and certainly other crypto-currency markets — are more people wondering if they should be participating in digital assets and cryptocurrency assets, and what are the numbers telling us?
I would say that, pretty much, the numbers are numbers. They are out there to be interpreted by different people. And if we look in the reality of this entire process, Angie, we’re reading things differently, each and every single one of us. But the way I would look at the entire situation, and the way others look at, and the question we asked ourselves is: what do we need to be? What’s going to happen with me, myself, and my assets, when this financial crisis would hit. And these solutions that we’re seeking, and the solutions that are developed this year, are literally in stablecoin solutions. And that’s why we’ve really, truly engulfed ourselves into this market. So, I’m personally very positive about what is going on. Not only that but looking at Facebook what they’ve been bringing in and everybody, the big companies that are trying to immerse themselves into this market. It gives a very positive feeling that there’s good stuff coming towards us this year. And this is the year of stablecoins. This is the year where governments are looking at crypto very seriously. If this thing was like a year ago or two years ago, it was like, overseen, or you know, a lot of people invested. Now you have governments that are saying, “Hey, we need to regulate this thing.” And that, to me, is very positive.
Well, positive in the face of political and financial volatility, but only because there are alternatives out there. And Daniel, thanks for highlighting what those alternatives are in the face of all of this. Well, thank you, Daniel. And thank you, everyone, for joining us on this latest edition of Word on the Block. I’m Forkast.News Editor-in-Chief Angie Lau. Until the next time.
