Audit giant PwC is the latest mainstream firm to show new interest in digital currencies. This week it announced a partnership with decentralized lending platform Cred to advise on better standards for stablecoins.
While details of the partnership are light, Cred is working on its own stablecoin tied to the U.S. dollar, and is hoping to avoid the mistakes of certain competitors by ensuring confidence in its operations from the ground up.
PwC’s overall interest here is to build broader trust so it can help millions of new users gain digital assets — and presumably create new revenue streams for its global professional services business in the process.
Like IBM and other companies large and small that are looking at stablecoins today, PwC is attracted to the blend of traditional and new monetary systems. Stablecoins are digital currencies pegged to a stable asset, such as gold or fiat currencies, or backed by collateral (that could also be a cryptocurrency); the arrangement is analogous to how some countries peg their national currencies to the dollar.
“Many investors are looking for crypto assets that can be pegged to a stable fiat currency such as the US dollar,” PwC and Cred said in the announcement. “But these assets require a reserve ledger built for decentralized assets, that can provide 100% transparency and value substantiation. PwC’s experience will provide valuable perspective on how standards can be enhanced to facilitate a more transparent set of reserve functions, stablecoins and deposit and yield products.”
PwC did not comment when we asked whether it has explored partnerships with other stablecoins, nor did it comment on the profile of customers that are looking to adopt these consulting solutions.
Today, stablecoin adoption and real-world implementation are still in the early stages. Despite more stablecoins getting introduced this year, there has not yet been any set of standards established for the space. Some stablecoins that have tried to go through traditional procedures, such as reserve auditing processes, have gone awry thus far, most famously Tether.
Still, optimism seems to be growing. Stablecoins have been in development for some time in the U.S., with multiple companies raising large sums of money to create a price-stable coin since early this year, including Carbon, MakerDAO and TrustToken. The company Basis appears to have raised the most to date, in a whopping $133 million round from top venture firms and financiers announced six months ago.
So far, stablecoin project teams have generally been heads-down developing detailed mechanics of their own coins, and they have been independently working with regulators to ascertain the future of stablecoins and their role in it.
Hence the lack of standardization. In most of the stablecoin teams’ mind, there should be only one or just a few stablecoin winners that could capture most of the mind share, and create products and an ecosystem that uses its cryptocurrency. This creates an invisible divide in the ecosystem, with the coins and tokens all trying to outcompete each other.
One outlier in the market has been USDT, a widely tradable stablecoin created by Tether, a company run by the same executives behind the exchange BitFinex. Tether has been criticized for its failure to prove that the reserve has enough USD to back its digital currency on a one-to-one ratio, which it promises for its dollar-pegged cryptocurrency.
Among other issues this year, Tether “dissolved” its relationship with its first auditors, Friedman LLP, without an audit ever being completed. It then commissioned a law firm, not an auditor, to review its reserve balances. The result was its proof of funds’ “transparency update” highlighting that it should not be construed as the results of an audit. For more details, check out TechCrunch’s writeup back in August.
Meanwhile, PwC is just one of the traditional parties hoping to clean up stablecoins for mass adoption.
IBM most recently announced its exploration into stablecoins through a collaboration with Stellar by building a stablecoin on the Stellar blockchain. Additionally, a number of stablecoins have come out in the last few months, from the crypto exchange Gemini issuing the Gemini Dollar and financial blockchain solution Paxos issuing the Paxos Standard. There are also other stablecoins such as Terra, which is looking to implement a stablecoin through e-commerce.
Cred, for its part, has already been busy laying a strong foundation. It is founded by former PayPal financial technology veterans, with the mission to harness the power of blockchain to allow everyone to benefit from low-cost credit products. The team at Cred did not comment on whether they have worked with a consulting partner before, but they are currently in conversation with other consulting firms.
Cred is also the founding member of the UP Alliance, consisting of Uphold, Cred, Blockchain at Berkeley and Brave. Earlier this year, the Alliance announced a universal transparent reserve and custody standard that introduces what it calls “proxy” digital assets to the world, via the Universal Protocol Platform.
Given that cryptocurrency price volatility continues to be an obstacle for institutions looking to adopt the technology, it is likely that other financial and consulting institutions will turn to stablecoins as a way to support their existing customers and bring in interested new customers.
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