Cryptocurrencies Traded on Precious Metal Digital Exchanges. The Way Forward For Market Stability?

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Does the world really need more cryptocurrency?

What if there was a new monetary system designed to overcome the severe price volatility which has made cryptocurrencies unappealing to use as tender for mainstream consumers — a digital currency pegged to gold rather than speculation?

With his father as his CFO and the backing of one of the world’s leading digital exchanges for precious metals – could Thomas Coughlin’s Kinesis Money be at the forefront of a new global monetary system? Is there a gap in the market for such a  project?

Kinesis Money is fully operated by the Allocated Bullion Exchange (ABX), an institutional marketplace set up in 2011 for the trade of physical precious metals, gold and silver, being two of the most stable and definable stores of value, across seven global locations.  For the benefit of Kinesis Money, ABX provides the comprehensive infrastructure with the advent of blockchain technology – and the introduction of cryptocurrencies. This gives it a firm advantage over other cryptos in the gold space which simply do not have this backing.

You cannot do much with a kilo bar of gold that is stored in a vault somewhere. You cannot monetize it and or access the liquidity in terms of the sterling value that is represented.

According to Coughlin: “We saw the introduction of cryptocurrencies, and combining a traditional asset such as physical gold with a digital currency, as a great opportunity to return to being able to transact gold easily and efficiently – using it as a medium of exchange.”

An incentive to spend and trade – making it into a proper monetary system – rather than lying in a vault

To encourage users to send, spend and transact on the Kinesis Blockchain Network, Kinesis has introduced a multi-faceted yield system that remits the 0.45 per cent it takes on each transaction back out to the network – based on how they’ve participated. For example, depositing physical gold into the Kinesis Vault Network via ABX, converting it into Kinesis currencies and then sending, spending or transacting it qualifies you for a minter yield, while others may get a depositer or holder yield.

According to Thomas: “These mechanisms are designed to bring metal into the Kinesis Monetary System and then get it moving, we don’t want to have something that people are just holding in the way we’ve seen with bitcoin. We’ve developed this to facilitate trade.”

How can stablecoins lead to the mass adoption of crypto on a global level?

The key to cryptocurrencies being widely adopted is simple; they must be considered as a stable store of value. For us to achieve this, we based our stablecoins on something extremely stable, for instance, precious metals such as gold and silver. If the cryptocurrency is backed by a stable asset the price of that currency will reflect accordingly. If this currency can also be redeemable for the underlying asset, this will further validate the stability and trust associated with this currency”.

Most importantly, users of the cryptocurrency should have an easy and effortless way to liquidate their holdings into a currency which is widely respected, across the world. The attachment of a debit card would be the ideal solution as this would ensure users could send, spend or transact with these currencies at point-of-sale anywhere in the world, with a currency free from fluctuation, Coughlin adds.

“Current stablecoins have many issues which affect their valuation and usability. These include counterparty risk, such as when the bank holding the dollar backing is considered insolvent and a lack of liquidity. Or, an arbitrary mechanism being used to keep the stablecoin’s price in line with the price of the underlying asset”.

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