Institutions can hedge against possible bank runs with a new wallet from euro-backed stablecoin issuer STASIS, which stores assets with financial intermediaries that have low-risk balance sheets.
STASIS said Tuesday its new wallet, fully integrated into the Single Euro Payments Area (SEPA), would offer regulated financial institutions, in both business-to-business and business-to-consumer markets, a new gateway into cryptocurrencies.
“We aim to bring licensed fintech service companies to the cryptocurrency market and enable them to experiment with using crypto for its operations without any regulatory or safety concern,” STASIS founder and Chief Executive Gregory Klumov said in a statement.
The new wallet expands how the assets backing the stablecoin are stored. Rather than holding them with commercial banks, the underlying funds are held with financial intermediaries. Speaking to CoinDesk, Klumov said it was a “very significant” characteristic that effectively minimizes counter-party and balance-sheet risk.
Two intermediaries who partnered with STASIS are said to have accounts with European Union central banks. While one is in stealth mode, the other, crypto financial services provider Globitex, stores its assets directly with the central bank of Lithuania, Klumov said.
A non-custodial solution, the wallet will enable the firm’s 30,000 users to buy and sell its EURS stablecoin directly from their bank accounts.
Most commercial banks make money by lending users’ deposits as loans. Generally, only a small fraction of funds are ever held by the bank and available for withdrawal on demand.
Should confidence in the banking system fail, as it did in 2008, many big-name banks would not be able to meet all customer withdrawal requests. Institutions are only eligible for a maximum payout of €100,000 (~$117,000) for assets lost should a bank collapse.
The fear of financial collapse is particularly prevalent in Europe, where the euro crisis brought many southern states to the verge of bankruptcy. Many vividly recall customers of Greek and Cypriot banks receiving “massive haircuts” on their account balances, in return receiving equity and bonds that were “basically worthless,” said Klumov.
Financial intermediaries, like the ones partnered with STASIS, hold user assets in segregated accounts; they can be withdrawn in their entirety at any time. “In the case of a run on such an institution, every customer will get their money back,” Klumov said.