A stablecoin is a cryptocurrency backed by reserves.
If I create eKalu currency it's worthless 😭. if I create eKalu currency backed by $, it's the same as $.
These Nigerian currency notes was backed by gold, you take note to CBN & redeem for gold worth £1 and 5 shillings.
This was the same in other nations.
US Dollar was also backed by gold.
Hence you see "will pay to bearer on demand" $5 in gold
In 1971, Nixon removed the $ from direct convertability. The Dollar was now backed by "full faith"....no "promise" to convert to gold
In 1973, Nigeria changed her currency from £ to Naira.
The "promise to pay" is also gone.
Naira is now backed by "full faith"
What's full faith? Crude oil, Cocoa, Rubber, exports.
The eNaira is pegged to the Naira.
It's not peged to the $ or gold.
This means it's not a stablecoin, but a digital coin built on the block chain open ledger.
To be a stablecoin, the CBN needs to allocate reserves, which it does not have.
So I see an opportunity.
UBA has a US banking license.
UBA can create a $ blocked accout in US and issue eUBA in Lagos, backed by those $ in New York. eUBA can be used to open LC. US depositing persons share fees with UBA or any issuing authority.
Anyone that can legally collect, and lockup $ in US can also issue local US cash-backed Cash.
The local eCash can only grow based on US dollars backing it, in effect a dollar peg.
If Emeka remits cash from US, cash sits in US, but local eCash created, which is the same as a $.
The local $ backed eCash will have rates that are market driven, and will relieve the pressure on CBN, but CBN will lose its ability to drive rates or "save the Naira".
So it's a choice between supply at market prices and control.
Remember, more supply means prices fall.
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