WHAT ARE STABLECOINS?

A “stablecoin” is a type of cryptocurrency whose value is tied to an outside asset, such as the U.S. dollar or gold, to stabilize the coin’s price.

They came about as a solution to one key drawback in the crypto space: prices are unpredictable and have a tendency to fluctuate, sometimes wildly.

Stablecoins act as a catalyst to facilitate the use of cryptocurrencies for functions inherent in mainstream finance. This exciting space is referred to as Decentralized Finance (or DeFi) and opens up cryptocurrencies to functions such as – the trading of goods and services over blockchain networks, cryptocurrency derivatives, establishing credit, taking out loans, cryptocurrency interest and much more. Such applications are not possible if the transacting digital currency remains volatile.

FIAT collateralized stablecoins use a set amount of a standard fiat currency, like the U.S. dollar, as collateral to then issue stablecoins. Other forms of collateral can include precious metals like gold and silver, as well as commodities like oil.

The stablecoins listed on OVEX are FIAT-Collateralized. FIAT is the government-issued currency we are all used to using on a day-to-day basis, such as Rands, Dollars and Euros. FIAT collateralized stablecoins use a particular amount of a standard FIAT currency (like the US Dollar) as collateral to issue stablecoins. The number of stablecoins issued is usually 1:1 with the collateral behind the issuance. Their value is then pegged to that of the underlying FIAT currency. This method of FIAT collateralization requires a custodian (like TrustToken) to hold the fiat currency (collateral) and guarantee the issuance as well redemption of the stablecoin tokens.

Tether (USDT) and TrueUSD (TUSD) are popular stablecoins that have a value equivalent to that of a single U.S. dollar, and are backed by dollar deposits. OVEX supports both USDT and TUSD on its exchange. What’s more, OVEX offers Interest Accounts that can earn up to 10% annualized interest on these coins. This is a great place to park cryptocurrency profits in an otherwise stable digital asset generating interest otherwise unattainable in legacy savings accounts.


OVEX offers a number of stablecoins on its platform. At the time of writing OVEX stablecoin offerings include:

  • Binance USD (BUSD)
  • Tether (USDT)
  • TrueUSD (TUSD)

 

OVEX can grant clients direct access to TrustToken – the company behind the token TUSD. Meaning you can buy TUSD at the implied market rate without an offshore wallet facility. TUSD’s focus on compliance and transparency has made it a solid contender when compared to other stablecoins in the market. TUSD is fully collateralized, meaning every token minted is backed by an actual dollar. The U.S. Dollars held are verified by an independent third-party accountant that publishes monthly attestation reports. This is what makes TUSD a trusted stablecoin provider.