Fiat assets are tied to some government agencies, which allows influencing their cost. It helps prevent jumps in prices, which we often see in cryptocurrencies. Stablecoin was created as an alternative to both fiat and crypto-assets. To stabilize the price, it is tied to other assets or commodities, which avoids sharp fluctuations in cost. This approach is very controversial, as the stablecoin loses its decentralization but protects the resources of its contributors. Today, exchanges using stablecoins can operate legally in Europe upon obtaining a Lithuanian crypto license.
DefinitionÂ
Stablecoins are a different type of crypto asset, the cost of which is tied to other assets. They were created in response to price volatility expected with standard crypto assets. Due to frequent fluctuations in the cost of Bitcoin, it is suitable for earning money, but it is generally not ideal for making payments for goods and services. For example, you ordered a service that costs 0.02 Bitcoin, the rate is 42,100 USD per Bitcoin, which means you will have to pay 842 USD. By the time the worker completes the task, the value of the Bitcoin has risen to 66,900 USD per Bitcoin, which means you have to pay 1,338 USD. Moreover, most people who work with Bitcoin cannot predict the value of assets in a month, as too many factors affect the result.
So, they are better suited for DeFi, because their cost is fixed. In addition, currencies like Tether and USD Coins have excellent market cap numbers. It is a signal that they are protected as much as possible, and any financial manipulations cannot significantly affect the currency’s value. Another advantage is that you can efficiently work legally after obtaining a crypto license in Lithuania. Paperwork takes several weeks, but you can work and arrive in an advanced European country.
What assets are actively used?Â
Most stable coins are pegged to the US Dollar or other fiat. Moreover, in some cases, the cost is fixed in a ratio of 1: 1. It allows you to simplify the calculations and pay for goods and services as much as possible.
However, there are several other assets that it may be linked to:
- Crypto assets (coins, tokens);
- Gold, silver, emeralds, and other precious stones;
- Oil, gas;
- Innovation.
Each of the above assets has its advantages and disadvantages. So, the most stable of them is gold because its value is growing slowly.
Some people will ask why pegging stablecoins to other crypto assets whose value is not controlled. It is done so that the regulators do not have an opportunity to influence the value of assets, to leave it decentralized.
Why is it created?Â
If most stable coins are worth fiat currency, then why are they created? Why isn’t it easier to use fiat currencies? The answer to this question lies in understanding the main advantages of using crypto:
- Ability to create smart contracts;
- Reduce the cost of transactions;
- Avoid state control;
- Improve security and more.
Smart contracts are a particular type of agreement that allows you to avoid fraud altogether. Control over the fulfillment of obligations passes into the hands of computer technology.
International transactions, including SWIFT technology, are expensive and take a long time to process. So, cryptocurrencies can solve this problem. Here, any financial transfers take no more than 30 minutes. In addition, the user pays fees for using the blockchain but does not pay for financial transfers, regardless of the amount.
Quite often, state authorities can block transactions without explanation. There is a theory that crypto assets are mainly used by criminal elements or entrepreneurs that do not want to pay taxes. However, this is not true. The reality is that a bank can block transactions even of citizens with a perfect reputation.
Many European banks are trying to do everything to improve their security, but hackers easily bypass the protection. The practice has shown that blockchain is a more secure technology. It is impossible to intercept a transaction, information about which is not recorded anywhere. If neither party lets it slip, then the third party will not be able to recognize the transfer.
Thus, cryptocurrencies are an opportunity to make any transactions, including international ones, more safely, quickly, and cheaper. A stablecoin is an opportunity to get stability and not worry about the exchange rate.
Legal features of useÂ
The legal aspects of using cryptocurrencies vary by country. In Lithuania, any cryptocurrencies are equated to fiat currencies and NFTs to securities. Their use is taxed under the same system. As a result, many American and Asian companies register cryptocurrency license in Lithuania so Europeans can use their services.
If you want to open a crypto exchange or wallet using stable coins, you need to get a license. It can be done by both a foreigner and a country resident. You can get one or both varieties. To obtain a license, the most critical aspect is reputation. Our agency will help you complete all the necessary documents and tell you how best to register a company, but this is unlikely to affect your reputation. If you have previously had problems with the law or are a criminal, be prepared to receive a refusal.
In their work, crypto exchanges or wallets must provide activity and customer reports to regulatory authorities. If FCIS finds errors, it may revoke the license. It will be tough to get it again.
ConclusionÂ
A stablecoin is a great tool that allows you to enjoy the benefits of cryptocurrencies while not risking losing money due to fluctuations in the value of currencies. Anyone may use stable coins, and you can purchase them on exchanges or in wallets. If you want to run a business based on cryptocurrency, you can obtain crypto license in Lithuania. It may take a couple of months, but you will be able to work legally, which will increase your credibility in the eyes of users.
Source: gofaizen-sherle.com
