US crypto exchange Coinbase Global encouraged developers working on its new blockchain to focus on how to create stablecoins that track the rate of inflation to preserve purchasing power.
Coinbase said in a Mar 24 blog post that it’s particularly interested in these so-called “flatcoins,” adding that exploring the potential of stablecoins is “more important than ever” given the recent woes of the banking system.
Stablecoins are supposed to hold a constant value, typically US$1, giving crypto investors a place to park funds as they navigate the highly volatile digital-asset market. An inflation protection overlay would tap into demand for a cushion against elevated post-pandemic price pressures.
Coinbase last month rolled out Base, a so-called layer-2 blockchain that aims to make transactions on the popular Ethereum network faster and cheaper. It also announced a related fund to support early-stage projects on Base.
Some stablecoins, such as Tether and USD Coin, are backed by reserves like cash and bonds. TerraUSD was an example of an alternative approach that tried to use algorithms and trader incentives to hold a US$1 peg but spectacularly failed, roiling crypto and sparking a regulatory firestorm.
Coinbase said in the blog post that it welcomes “other forms of ‘flatcoins’ that do not peg to fiat but rather fill the space between fiat pegged coins and volatile crypto assets.”