I’m here today with Roberto Durscki, COO of Stablecorp. Stablecorp is a partnership between 3iQ, a leading crypto asset manager and Mavennet, a leading enterprise blockchain solution developer.
Stablecorp recently released their much anticipated QCAD stablecoin that opens up Canadian crypto markets to new opportunities. These include payment rail solutions for business, access and speed advantages for crypto traders and other crypto participants.
This discussion touches on the background of Stablecorp and the ideas behind QCAD. It explores the relationship between stablecoins and central bank digital currencies and what Stablecorp’s vision of the future is.
Bitvo is an authorized partner for QCAD with Stablecorp.
Tristram: Roberto Durscki, COO of Stablecorp, is with us today. Rob, thanks for being here.
Rob: My pleasure, Tris, thank you for having me here.
Can you tell us a bit about your background?
Rob: Sure, I’m a banker by training and spent a long time in the industry in both retail and commercial banking. I started at Citibank in 2004 and had the privilege to work at other benchmark institutions like HSBC, Rabobank and with two of the big five Canadian banks through Deloitte Canada.
I started in technology, focused on CRM and sales platforms. I moved on to back-office and branch management. I then spent the balance of my career in product management for retail and commercial banking focused on credit and debit cards, cash management, as well as checking and savings accounts.
I joined Deloitte when I moved to Canada in 2015 to do my MBA. During my time at Deloitte, (until 2017), I was able to develop an in-depth understanding of the importance and capabilities of digital banking and blockchain. That triggered my interest and ultimately drove my move to join Stablecorp, where we are developing what we believe is the most important crypto-financial tool in Canada, to date.
Can you tell us a bit about what Stablecorp is and what it does?
Rob: Sure. Stablecorp is a recently incorporated company. We’ve been operating a little less than a year. It is the by-product of a shared vision from our founders that Canada needed and deserved a better payment and settlement solution, its own stablecoin. We realized that a stablecoin would be an essential component for corporate growth in crypto. And that’s how QCAD, our first product, came to be. It began as a white paper in early 2019 and launched in January 2020.
Can you give us some insight into the QCAD stablecoin? What does QCAD do and how does it work?
Rob: Our first product, QCAD, is a stablecoin, which means it’s a digital representation of a Canadian dollar on top of a blockchain. We started it using the Ethereum network, as an ERC-20 token, but we are evaluating expanding to other networks according to client needs. ERC- 20 for those not familiar, is a type of token standard on the Ethereum blockchain and is widely accepted across the blockchain ecosystem, facilitating integrations and go-to-market.
We are initially focused on promoting awareness and increasing the circulation of QCAD in Canada, as this is fundamental to enable more advanced and value-adding use cases for our clients. The Canadian market is still in the early stages compared to more mature markets for stablecoins like the United States and requires some groundwork to be done. Right now, the global market has around USD$6 billion of stablecoins in circulation, most of it denominated in USDs.
The idea behind stablecoins is to build a crypto value-stable asset that leverages from the benefits of the blockchain while ensuring an equivalent value of a national currency. The blockchain represents an alternative rail for asset and value transfer. And if compared with other means of payment or transfer like credit cards, the Swift rail, the wire transfer rail, and others, stablecoins are faster and cheaper to transact (for both payee and payer).
We are exploring more advanced use cases for QCAD’s infrastructure, but that might be better for a future discussion.
What about regulation. Is the QCAD product regulated in any way?
Rob: Yes, it is, but let me explain how the regulation applies to QCAD first.
All crypto assets are going through a period of discovery in the regulatory landscape, and that includes Canada. As with any innovative product, regulators need to weigh many different elements before deciding if and how to regulate them.
A key regulatory concern for payments and assets is preventing money laundering and terrorism financing. This is the mandate of FINTRAC in Canada as they set rules on how the financial service industry should proceed on those topics.
Stablecorp, due to its role with QCAD, will be required to register as an MSB (Money Service Business) with FINTRAC as of June 1st, 2020, according to the new Proceeds of Crime (Money Laundering) and Terrorist Financing Act. This is actually a good thing for us and all ecosystem players in the virtual currency environment. It establishes a minimum set of rules to prevent activities and businesses that could stain the image of a whole industry. All Stablecorp’s policies were established in line with Fintrac’s requirements, and we have already submitted our MSB pre-registration.
Could you go into the mechanism about how a stablecoin like QCAD works? Is it similar to an ETF, and where are the funds stored?
Rob: It’s different and simpler than an ETF. ETFs have a complex architecture, as well as a different regulatory framework. They involve more complex processes like asset management, custody of the assets, clearing, and so on.
A Stablecoin like QCAD is simpler and directly linked with the underlying asset. Fiat is deposited based on purchases of QCAD, and those deposits stay in a separate account dedicated only for that purpose. These deposits are based on the value of the coins in circulation, in the case of QCAD, 1:1 with the CAD.
When a request for a coin or token takes place, it activates a series of verification processes before issuing the token and sending it to the buyer’s digital address.
And the reverse process is also very similar. Whoever is holding that token, if they have a relationship with us, and have gone through the KYC processes, would be able to sell those tokens back. They simply send them to our smart contract address, then the smart contract would delete those tokens, and we will send the money back from the deposit account to that holder.
Maybe a better analogy would be that it’s kind of a digital traveller’s check, the ones we had in the old days. People would buy traveller’s checks and use those whenever they travel and/or to avoid carrying or keeping cash. A stablecoin uses a similar process but updated with cutting edge technology and a new payment rail.
The challenging part of the stablecoin is all the things the users don’t see. A variety of controls are executed to make sure that that money is coming from a safe source. These include checks to verify the request is coming from an onboarded partner, checks for whitelisted addresses, and screening to verify the legitimacy of the players involved in those transactions. However, the basic mechanics of the transaction itself are relatively simple.
Digital traveller’s checks. I like it.
Rob: Revealing all my years in banking.
Just to get a bit more of an in-depth view of what stablecoins are. What role are stablecoins playing in crypto today, and what role will they play in the financial market of the future?
Rob: There are many visions on the role that stablecoins will play. Our vision of a stablecoin is through the lens of the constraints and pain points of the current banking infrastructure. Most banks and consumers know what these pain points are but are relatively comfortable with them because they see no alternative.
New innovative ideas typically don’t come from within legacy institutions, because of what I would refer to as, legacy thinking. As in many industries, new ideas have to come from outside the industry. Companies like Netflix, Uber, Amazon, and of course, Bitcoin were all pioneers in their respective areas. In the case of Bitcoin, the idea was to reduce pain points when moving value between individuals.
The initial vision of Bitcoin was not based on a volatile value. This volatility is a by-product of the discovery process as people, networks, and society learn how Bitcoin works. This is common for any new asset and is true across all of crypto generally.
This volatility creates a conflict. On the one hand, you have a very useful tool and infrastructure, and on the other, you have a volatile asset that makes some people uncomfortable. That’s where stablecoins fit in.
Stablecoins combine the power of this new infrastructure with an asset that is already understood. In the case of QCAD, the established asset is the Canadian dollar. A stablecoin gives you liquidity, familiarity and the value awareness of a national currency and the speed, low cost, and flexibility of a blockchain network. The stablecoin gives you the best of both worlds.
As far as a role, there are lots of different use cases. The most obvious use case is for people who are already participants in the crypto market. Stablecoins give them a way to remain closer to crypto assets while not necessarily being directly exposed to the asset and its potential volatility, or at least not all the time.
For example, if you own a crypto asset, like Bitcoin, and you want to exit the market for some reason but don’t want to be too far away so you can re-enter it quickly, instead of “cashing out” your Bitcoin you would exchange the crypto asset for a stablecoin. This enables instantaneous in and out of crypto and ensures that the value is fully backed, liquid, and yours.
You could say that stablecoins represent a bridge asset between the crypto world versus the fiat world. But many other use cases are being explored like FX, remittance, invoicing, payrolls, settlements of equities, among others.
For the typical crypto participant, it sounds like it reduces the amount of friction or time moving in and out of crypto to fiat, is that correct?
Rob: 100%. Friction refers to all the costs and decision points associated with moving value through or across a system. The amount of fees and time in the Canadian financial landscape is high, but there wasn’t an alternative until now.
You’re reducing expensive and unnecessary steps in the transfer process with stablecoins, without adding risk. You are actually helping to mitigate risks.
We see growing applications for the entire stablecoin space, not just for QCAD, with applications like payroll, and invoicing for businesses. There’s a lot of friction involved in various B2B payments, like when you have to pay clients or vendors or get paid by clients abroad. All of that activity has typically gone through banks because that was the only option available. That process has lots of fees and, in certain instances, a complex and time-consuming settlement process. Stablecoins are designed to help reduce those fees and improve the speed of the settlement process for businesses.
This is an area where we see significant future opportunities for stablecoins.
How does a stablecoin differ from a central bank digital currency? Could you go into that a little bit?
Rob: Sure. Conceptually speaking, there’s no difference. If a monetary authority issues a digital representation of the dollar, and if it flows on top of a blockchain, it will have the same value and the same properties as a private stablecoin.
When you talk about government agencies versus private initiatives, the new use cases and the innovations are coming from the private sector. The question is: will the government leverage those private innovations? Or are they going to buy or outsource development? There are many scenarios out there, but from a conceptual perspective, a CBDC, which is the term for a central bank digital currency, is mechanically the same as a privately issued stablecoin.
If I think about our vision at Stablecorp and consider the value that our work brings to society, the ideal scenario would be that all central banks adopt digital representations of their currencies and leverage from the blockchain. By doing this, they will be able to leapfrog the gaps in the current infrastructure. These gaps are an ongoing problem for both central banks and the banks themselves.
Do you think there is room for these two options to coexist?
Rob: I think there is, but we will have to see what happens in the long run. Currently, central banks appear to have some concerns about different aspects of private implementations. So, the market remains open to accepting multiple implementations of stablecoins.
We see this exact scenario in the United States. A certain stablecoin might be partnering with Asian partners and Asian vendors by implementing a fast rail to that market. Another stablecoin might be used as a link with exchanges, asset managers and dealers in North America, becoming an efficient rail for that.
The central bank may say in response: You know what guys, for those use cases, we are good that you guys are handling it. We are going to develop a unique rail for settlements between banks and central banks to do daily high-volume settlements. These are critical operations for the entire financial system, so we will look after this rail for now.
Ideally, we won’t have too many of these options in play at the same time, because that goes back to the original problem we have now, which is too much friction to the end-user. You don’t want it to be like twenty types of proprietary credit cards that work exclusively on twenty different proprietary payment networks. You don’t want to decide which restaurant you can go to based on what payment system they use and what card you have.
This innovation, like crypto, will continue to mature and eventually converge, but that will take time. There’s a lot of investment in networking and the integration taking place at this point from the private sector focused on a variety of use cases. So, we do not believe standardization is in the immediate future.
So yes, there’s room for multiple private and public stablecoins, but hopefully, for the sake of the end-user, it will settle on a reasonable number of implementations.
You talked about a couple of use cases. How can Canadians use stablecoins?
Rob: Looking at statistics, the fifth most traded exchange pair in the world is Canadian dollars versus US dollars. Canada is also third or fourth in the world in peer to peer remittances globally, exchanging more than $6 or $7 billion a year, internationally.
Canada is such a dynamic country in investment, immigration, and innovation, so people should have alternatives on how to pay, get paid, and keep their financial values.
Almost all of the payment and transfer processes involved in the exchange and remittances of Canadian dollars are either monopolies or oligopolies. That means hefty fees and processing times. With QCAD, we are giving individuals and companies alternatives to existing approaches. They can compare our offering and weigh the pros and cons of the traditional options and choose what suits their needs.
What would you say is the vision of Stablecorp going forward?
Rob: Our vision from the beginning is to provide a fundamental financial tool and the infrastructure to unlock growth in the Canadian market. To do that, we’ve developed a 24/7, fast, free stablecoin infrastructure with QCAD that has strong controls and open to individuals and businesses.
Our robust infrastructure also provides a foundation for others to build cutting edge applications on top of it. And we will also be exploring new applications to be used on our infrastructure.
The single objective of the team at Stablecorp right now is the development of a reliable, stable, easy to use and liquid tool for financial payments in Canada.
Where can investors, traders and other interested people get more information about Stablecorp and QCAD?
Rob: Our website is www.stablecorp.ca. There you can find more information on our company, the QCAD stablecoin and our growing list of partners on the home page. For those ready to use QCAD now, the partners are the way to buy and sell QCAD with their app, website or wallets.
Perfect. That’s a lot of information for readers to chew on, so go to www.stablecorp.ca for more information about Stablecorp and the QCAD stablecoin. Thanks very much for your time today.
Rob: Thank you, Tris. My pleasure.
Canadians can buy, sell and trade QCAD, Bitcoin, Ether and other digital currencies on the Bitvo crypto asset trading platform.
Clients also get exclusive access to the Bitvo Cash Card and the Bitvo Same Day Guarantee.