The debut of a digital dollar (NZDD) stablecoin from the country’s largest home-grown cryptocurrency exchange offers could spur innovation in peer to peer payments and decentralised finance.
Easy Crypto today launched both its stablecoin and a new digital wallet, which can be used to store the NZDD tokens as well as other cryptocurrencies. The stablecoin, pegged to the value of the New Zealand dollar and backed with equivalent cash held in a New Zealand trust account, is aimed at tackling the two big barriers to crypto adoption - volatility and complexity.
“Everything is going digital, including currency, but what makes many people hesitate is the stability of these assets,” says Easy Crypto co-founder and CEO, Janine Grainger. “We wanted to change this by offering a trusted NZ dollar backed ‘stablecoin’ - NZDD - that bridges the gap between traditional finance and the digital age. NZDD brings the benefits of digitisation to the New Zealand Dollar; backed 1:1 with Kiwi dollars held in a bare trust; meaning your NZDD is safe and flexible.”
When an Easy Crypto customer buys NZDD, the proceeds of the sale in New Zealand dollars are transferred to the trust account. The higher confidence in asset-backed stablecoins compared to cryptocurrencies that can fluctuate wildly in value has seen them become part of the portfolio of many cryptocurrency investors and traders, but usually in the form of USDC and Tether, which are pegged to the US dollar.
The debut of a New Zealand stablecoin backed by a large industry player will “drive even broader uptake of crypto”, says Grainger.
But it could also generate opportunities for innovation across the Web3 ecosystem, says Paul Quickenden, the Head of Easy Crypto’s New Zealand operations.
“What we're observing offshore is that stablecoins are becoming a platform for fintechs to innovate on top of and that's where the programmability of money comes in,” says Quickenden.
A number of Web3 developers have developed applications based on stablecoins such as Circle’s USDC, taking advantage of “primitives”, programmable building blocks that can embed instructions in smart contracts. Stablecoins are seen as a leading way to use smart-contract-powered blockchains.
Instant payments, anywhere
“For people who have been battling for many years for things like open banking, the likes of instant settlement, programmability, and radical transparency, the stuff that comes with blockchains, will help facilitate new payment engines and transfers,” he says.
Early adopter, Christchurch-based crypto payment processor Pay it Now (PIN), will support using NZDD for transactions via Visa card terminals nationwide at retail stores, says Grainger.
“It’s definitely closing that gap between the crypto world and the traditional money world.”
Paying global teams
Quickenden also sees NZDD as being a potential option for businesses seeking a flexible alternative to banks, particularly for instantly paying dispersed teams and suppliers instantly.
“Payroll is a big thing,” he says.
“We've got staff from all around the world and paying them in stablecoins in their native currency makes a lot of sense for us. We are also seeing a number of our customers who are paying their suppliers in crypto currencies and stablecoins.”
Using stablecoins to meet payroll expenses has become common among startups overseas that are seeking to hire talent around the world and want to avoid significant fees associated with international money transfers. Startups like Deel, which offers payroll software for globally distributed teams, offer the ability for earnings to be paid to employees in cryptocurrencies or stablecoins like USDC, wherever employees or contractors are based in the world.
Bypassing traditional financial rails
That could potentially provide some relief for New Zealand Web3 startups that are struggling to secure bank accounts at our major banks, an issue Web3NZ explored in its recent whitepaper Debanking and its Implications for Aotearoa New Zealand’s Web3 Ecosystem.
“The Web3 community who aren't able to get access to the banking world can kind of operate parallel to that,” says Quickenden.
“They will be able to pay their staff in stablecoins and pay their bills in stablecoins. They can even invoice in stablecoins. So the core tenets of what you need to run a business startup start to manifest itself in a stablecoin.”
Stablecoins also form the basis of digital lending programmes, so the arrival of NZDD could see similar schemes launched locally allowing lenders to earn passive income. Quickenden says NZDD owners are able to add their stablecoins to a Uniswap liquidity pool, staking it to earn rewards.
“There's a global movement towards non-US-denominated stablecoins which we think is a great thing because we’ve all got sovereign currencies.”
Quickenden says Easy Crypto will “stick to its knitting” maintaining the NZDD infrastructure and explore ways to help the Web3 community innovate around its use.
Grants to support development
Easy Crypto would offer grants to encourage development of applications and services using NZDD, says Quickenden, and is receiving advice from Callaghan Innovation on how to develop its grants programme.
Grainger says the NZDD business model for Easy Crypto was simple.
“We don't make any money on the gas fees, we are selling NZDD one for one with a New Zealand dollar, and we're also redeeming it back one for one. We're not going to make any money on buys or sells,” she points out.
“The business model for us is that the money sitting in the bank account earns interest. And then we can use that interest to cover the costs of running NZDD. But we are also looking to give it back to the community as well. So one of the things that we've got at the outset is we're looking to offer grants for people wanting to build on this.”
Article authored by Peter Griffin.