There have been a few attempts to create so-called stablecoins, which are usually currencies pegged to either fiat currencies or other tangible assets. The ARC Reserve Currency is an asset-backed digital stablecoin. All proceeds from the issuance of these coins will be allocated to fixed income investments. A stable-priced cryptocurrency isn’t necessarily appealing to investors, but it may have some real-world use cases.
What is the Purpose of ARC Reserve Currency?
It is evident there may be a market for stablecoins, although it remains to be seen how they will be used exactly. The ARC Reserve Currency, for example, will certainly find its market, even though it remains to be seen how things will unfold. The concept itself is pretty interesting, even though it is yet another project associated with an ICO. More specifically, the currency is meant to raise money to issue such a token.
According to its website, the ARC Reserve Currency is both asset-backed and fully regulated. The latter point is rather interesting, especially considering there is no official ICO registered with the SEC as far as we know. It is unclear how the ARC Reserve Currency can be considered regulated if it isn’t adhering to the necessary guidelines in this regard. Then again, it seems the team has taken the necessary legal steps to avoid further scrutiny, which is always a good start.
The big question is why there is a need for stablecoins to begin with. After all, these currencies are not speculative in nature, as they are designed to have a stable value at all times. It is almost like Tether, but in a more legitimate and regulated form, by the look of things. Stable cryptocurrencies beat inflation and do not rely on untrusted counterparties. At the same time, they aren’t necessarily a great store of value, as that heavily depends on how useful such currencies turn out to be in the long run.
It is certainly true that most major cryptocurrencies are extremely volatile. That is part of what makes them so attractive, since it allows people to effectively earn money by holding these coins if the value goes up. ARC Reserve Currency doesn’t have that benefit, as it will always have the same value. This raises the question as to why there is even a need to host an ICO for such a purpose, as most cryptocurrency-related stablecoin projects involving any major form of fundraising have proven rather unsuccessful.
The team claims the ARC Reserve Currency has intrinsic value. This will be achieved by taking proceeds from the ICO and subsequent coin issues and placing them into a ring-fenced SPV. The capital collected will then be allocated in cash and fixed income investments. It is a rather interesting mix of traditional finance and cryptocurrencies, although it remains to be seen what the future will hold for this particular currency. The proceeds will be used to control and stabilize the price, whereas original ICO investors may not necessarily see a return on their investment in terms of profits.
For the time being, it remains to be seen if this project has any merit whatsoever. There will always be an interest in stablecoins, even though they shouldn’t necessarily be considered investments. That might also explain why these digital tokens aren’t required to register with the SEC, as they don’t appear to be securities. An interesting future lies ahead for the ARC Reserve Currency, although no one knows for sure if this currency will make any significant impact.