BitMEX co-founder proposes Bitcoin-based stablecoin free from US Dollar
- Arthur Hayes, the former CEO of BitMEX exchange proposed the creation of a stablecoin NakaDollar that has no ties to fiat currencies or banks.
- The NakaDollar would be pegged to the sum of $1 worth of Bitcoin and one BTC/USD inverse perpetual swap.
- The equation allows the creation of a synthetic USD equivalent without touching the fiat banking system or existing stablecoins.
Stablecoins and firms issuing these assets have faced increasing scrutiny from regulators over the past few weeks. To tackle the growing concerns, the former BitMEX CEO proposed the creation of a stablecoin, NakaDollar that is completely independent of fiat currencies and the banking system.
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Arthur Hayes proposes creation of synthetic US Dollar equivalent stablecoin
Fiat-based and US Dollar-pegged stablecoins have drawn intense scrutiny from regulators. US financial regulators are investigating stablecoin issuers like Paxos, raising concerns regarding the utility and relevance of assets pegged to the US Dollar.
Arthur Hayes, the former CEO of BitMEX and founder of the 100x Group, proposed an alternative to the stablecoin ecosystem’s challenges: dependence on fiat currencies like the US Dollar and the banking system.
Hayes proposed the Satoshi Nakamoto Dollar (NakaDollar), a new stablecoin that relies exclusively on Bitcoin and BTC/USD Inverse Perprtual Swaps on centralized derivatives exchanges.
1 NUSD = $1 of Bitcoin + Short 1 Bitcoin / USD Inverse Perpetual Swap
This eliminates the need for the banking system and fiat currencies altogether, pushing the crypto economy towards a Bitcoin native solution to current challenges.
Why NakaDollar and why now?
Hayes chose a time when crypto-friendly Silvergate bank chose to voluntarily liquidate. The bank is looking for ways to shore up its liquidity after a slew of cryptocurrency firms left the financial institution.
.@silvergatebank just bit the dust. #Stablecoins are under siege. "Dust on Crust" is an essay discussing how we create a #crypto native solution to our current $USD problems.https://t.co/4AwFhymwsE pic.twitter.com/AK1V0jhLZI
— Arthur Hayes (@CryptoHayes) March 8, 2023
As the Silvergate saga unravels, cryptocurrency exchanges have distanced themselves from the bank and this has hit the inflow and outflow of fiat currencies from the crypto ecosystem. Crypto clients relied on Silvergate for processing deposits and withdrawals, recent circumstances have resulted in severed ties and a disruption of the process for market participants.
Hayes proposed his stablecoin, free from the banking ecosystem and the US Dollar at a time when crypto firms are looking for an alternative.
Is NakaUSD a good alternative to stablecoins like Tether, USDC?
Mindao Yang, the co-founder of decentralized lending and borrowing protocol dForce Network believes Hayes’ proposition is a long theorized idea. Yang argues that it is inherently flawed to assume Bitcoin’s Open Interest (OI) could keep up with NUSD minting, it is contradictory to the inevitability that BTC’s OI dominance keeps on declining.
Hayes’ alternative to the current stablecoin problem allows crypto market participants to rely upon derivatives exchanges rather than hostile fiat banks to custody USD.
Author
Ekta Mourya
FXStreet
Ekta Mourya has extensive experience in fundamental and on-chain analysis, particularly focused on impact of macroeconomics and central bank policies on cryptocurrencies.
