Hello from Albert from cLabs and Serge from DuniaPay! Albert is a Product Partner at cLabs working on the launch of cEUR (Celo Euro), and Serge is the CEO of DuniaPay working on cXOF (Celo West African CFA franc). We hope our unique perspectives working on launching stablecoins on Celo are helpful to the larger Celo community as we collectively prioritize the next phase of stablecoins on Celo. As much as we all would want to launch every currency possible on Celo, there is only so much capacity in the ecosystem, so we think it is important to collectively focus our efforts where they will have the most impact.
Serge: We are gearing up for the launch of our proof of concept for cXOF which is intended to track the CFA franc, a currency shared by 14 counties located in Central and Western Africa. Our team at Dunia is super pumped by the upcoming launch because of the impact this could have. cXOF will allow residents of 14 countries in Africa to easily save (using protocols like Moola), and get paid or pay anyone anywhere in the world by swapping natively between multiple stable currencies available on Celo (cEUR, cUSD and more to come). Albert and I are excited to kick off this discussion with the community.
Albert: I am pretty excited about the launch of cEUR and working with Celo Alliance members to bring remittance capabilities and stability in the form of a Euro-tracking asset to the ecosystem! I can’t wait to see the feedback from the community and hear your thoughts about what we should work on next.
Launching new assets on Celo is designed to enable the community’s core mission to build a financial system that creates conditions of prosperity – for everyone. Each stable asset the community launches is a project that can contribute to the objectives of enabling more geographies to build on Celo and to have access to a native stable currency.
The cUSD, a decentralized stablecoin that tracks the value of the US Dollar, was launched on Celo in June 2020 to meet the greatest overall stable currency demand. Being the world reserve currency used as the basis of trade globally, a stablecoin tracking the value of the US Dollar was an intuitive initial currency.
As an open blockchain development platform, stable assets on Celo can be launched by anyone holding CELO. But before proposing a new stablecoin, we suggest that the community consider the following evaluation framework to assess whether it would be apt. This is an evolving, open-source framework - with the idea that we, as the community, collectively refine it as new stable assets launch as the protocol and community grow.
We think a primary consideration when evaluating a new stablecoin is how well it aligns with the mission of Celo. Each new asset should empower people and help to grow a more inclusive financial system, and we should compare these assets based on their relative ability to do so. Effective stablecoins launched by our community should converge on currencies that are both in need and have a high readiness for adoption. These factors can be qualitative and some of the teams building on Celo with “on the ground” knowledge can help model where geographic alignment is higher.
Albert: For example, some of the areas with a high need and readiness are Argentina, Brazil, Burkina Faso, Ivory Coast, Colombia, Kenya, Mexico, Nigeria, the Philippines, South Africa, Turkey, and Uganda. These are top of mind for us at this time, but we would love to hear from others about potential geographies or currencies that are similarly aligned.
Celo’s core users are mobile-first, so many community and Alliance members focus to support currencies that have high mobile transaction rates or the potential to financialize an already mobile population. Future fiat-tracking currencies should enable a greater range of mobile savings, payments, foreign exchange, and remittances.
The Celo ecosystem has many different builders and dapps in various countries. Launching new stable assets in builders’ native currencies is one way the platform can support developers and entrepreneurs in their unique paths to growth.
Specific currencies may also be needed to support partners (Celo Alliance members, grant recipients, seed funded ventures, and strategic partnerships) that are doing significant work to advance a mobile-first ecosystem if there is a large amount of users or liquidity that they can onboard to Celo by launching a new asset.
Serge: Celo’s mobile first approach could be incorporated into existing services like mobile money in Africa. Mobile money is one of the most used financial services in the majority of sub-saharan Africa. It is possible to bootstrap adoption by giving users a familiar mobile money experience running on Celo (cXOF in the case of Dunia) to launch a currency in similar regions. This report from GSMA highlights areas where there could be potential interest in launching a new currency on Celo.
Albert: It’s not just about the users, but the builders, hackers, innovators, and community that are involved in all aspects of our ecosystem. How do we support the people growing our community with the stablecoins that we launch in the future?
Aggregate value of the total supply of a fiat currency is akin to the market cap of a cryptocurrency on popular ranking sites such as coingecko.com and coinmarketcap.com. This is a good signal of relative demand for specific currencies.
There are 180 different currencies recognized by the United Nations, of which 130 are floating rate currencies (or pegged to a currency basket). Currencies that are in the top 20% (> $450 billion USD market cap), demonstrate even greater traction than the largest cryptocurrencies today. Today, the currencies larger in market cap than Bitcoin are (in descending order): CNY, USD, EUR, JPY, GBP, KRW, INR, CAD, HKD, AUD, TWD, BRL, and CHF (Source: https://fiatmarketcap.com/).
Currencies that maintain a fairly consistent purchasing power over time and have a history of low inflation are needed for financial stability. It is far easier for people around the world to save when they have access to a currency that has a predictable value over several years. This stability can be affected by many factors such as monetary policy, central bank integrity, capital controls, foreign exchange demand, and the politics of the issuing state.
In the modern system of mostly free floating exchange rates, some currencies hold their value relative to others better and exhibit lower exchange price variances over time. Some of these currencies include the US Dollar (USD), New Zealand Dollar (NOK), Singapore Dollar (SGD), Japanese Yen (JPY), and Swiss Franc (CHF).
Albert: Having more stable assets allows other community currencies to build on top of these foundations if they are also developing stable rate currencies. For instance, cXOF is able to leverage cEUR to hold in their separate reserve to issue a currency that exists on top of it. We are keeping a close eye on currencies that help users protect their savings at scale in such a manner.
For people to utilize any stablecoin as a meaningful medium of exchange, it needs to be convertible to other assets within the current financial system. Today, this is done primarily through exchanges and other cash-in/cash-out providers. Convertibility into other currencies and goods or services helps build trust in a new stablecoin.
Albert: New stablecoins should have sufficient liquidity to be converted to fiat and other crypto assets. Examples of a few non-USD pegged stable national currencies that have gotten some early exchange traction include TerraKRW, EURS, BitLira, and BitCNY. In particular, stable crypto-asset versions of fiat trading pairs on exchanges where CELO is currently traded against fiat pairs, gives users the opportunity to convert Celo-native assets to equivalents of their local currencies.
Serge: Some countries have better existing payment rails to bridge fiat to crypto and it’s easier to get traction where there’s existing trade and exchange liquidity. Some countries also have existing traditional payment systems (such as Mobile money agents) that can be leveraged to give local users a familiar cash in/cash out method.
Legal environments around the world have varying levels of clarity for cryptocurrencies and mobile money transmission. It’s important for the community and the on-going development of Celo that entrepreneurs and developers comply with the laws of their jurisdictions. The Mobile Money Regulatory Index is one example of a quantitative assessment of geographies that are more friendly towards mobile money adoption. It’s always preferable to work within jurisdictions with favorable legal frameworks supporting mobile money and cryptocurrencies.
Albert: This should be seen as a basic framework and as a starting point to guide community discussion. It is a work in progress as the Celo community launches more stable assets in the future. We expect more stablecoins to be added to the Celo platform at the approximate rate of one per quarter to give the ecosystem time to generate sufficient demand and adapt future releases with lessons learned.
Serge: Using this framework as a building block we should be able, with the help of the community, to not only narrow down the focus on the next stablecoins we should launch on Celo, but also to improve the decision framework itself to be more inclusive. Our mission with cXOF is to bridge the already widely adopted mobile money services in Africa with crypto currencies that have the potential to create more value added services. We hope our work on this at Dunia will bring some insights to others looking to launch stable currencies on Celo.
If you would like to contribute to Celo and help us shape the future of decentralized mobile finance, join the Celo Discord community and share your thoughts! If you would like to share your input on how these stablecoins could be used and adopted, please reach out to us.