What is Happening?
Bluejay Finance, a decentralized stablecoin protocol for developing stablecoins pegged to fiat currencies, has secured $2.9 million in financing from Zee Prime Capital, C2 Ventures, Stake Capital Group, RNR Capital, Daedalus Angels, Moonlanding Ventures, Oval Ventures and others with operator-angels including DeFi initiatives including Ribbon Finance, Flux, Voltz, and Alpha Venture Dao.
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https://twitter.com/BluejayFinance/status/1549967419770187778?cxt=HHwWhMClzf_Jy4IrAAAA
What is Bluejay Finance?
With its launch in 2021, Bluejay Finance seeks to expand the number of stablecoin options available to investors in the DeFi sector that are not USD-based. Through partnerships with DeFi protocols, decentralised exchanges, centralised exchanges, and fintech organisations, it intends to develop its staff and distribute stablecoins, focusing on Asian stablecoins like the Singapore Dollar and the Philippine Peso.
Investors may reduce their exposure to foreign currency risk and transaction costs by transacting in a more universal, locally known medium of exchange where the forex market of the financial world will be mirrored on the blockchain to facilitate access to financial services and access to DeFi for all consumers and corporations.
Importance of Stablecoins and Financial Inclusion in Asia
A significant problem of financial inclusion persists throughout Asia and the Pacific when it comes to providing low-cost financial services to underserved communities. When compared to other developing regions, the area as a whole has a more profound banking industry. However, this conceals substantial differences across Asian economies. The most often cited challenges to financial inclusion are related to price, accessibility, and lack of identity. According to a report by Asian Development Bank, there is a severe lack of financial inclusion in emerging Asia, with just 27% of people having an account at a formal financial institution and 33% of businesses reporting having a credit facility or a loan from a banking institution.
It is important to note that access to capital for MSMEs is sometimes hampered by a lack of formal credit history and a general lack of urgency and understanding about personal savings accounts when considering 60 percent of Southeast Asians are underbanked or unbanked and 70 percent of Southeast Asian workers missing bank accounts, it is evident that financial inclusion must be prioritized. It is pertinent to note that a range of financial services and payment channels are now available to consumers and companies throughout Asia as a result of the region's high mobile penetration. High mobile penetration and DeFi-based stablecoin lending may be a novel solution to increase financial inclusion in the Asian markets.
Stablecoins may play a significant role in the future of Asian financial services. However, the majority of stablecoin solutions are focused solely on USD and are not suitable for use in the real world, where transactions are denominated in local currencies; this means that users do not have the option of having exposure to currencies other than USD in the DeFi space, exposing them to additional costs and forcing them to use the unfamiliar currency.
By having stablecoins of multiple currencies globally on the blockchain, multi-currency-based stablecoins reduce the transaction barrier for companies and people in these nations and decrease currency exchange risk, making payments and access to money more efficient.
Understanding Stablecoin Adoption in Asia
While the vast majority of stablecoins, such as Coinbase's USD Coin, Tether, Gemini Dollar, and Paxos Standard, are pegged to the US dollar, 2021 has seen a rise in stablecoins pegged to different currencies throughout the globe such as Singapore Dollar, Hong Kong Dollars and Indonesian Rupee.
Further, the rise of stablecoins that aren't pegged to the USD shows that the market is developing and ready for stablecoins adoption - Asia has a perfect storm of favourable conditions for accelerating the spread of stablecoins in developing nations in Asia.
The potential for this technology to revolutionise the remittance industry is exceptionally bright in the developing economies of Asia. Recent research by Remitscope found that countries in the Asia Pacific (APAC) region accounted for 53% of all international remittance flows, where traditional methods of sending money are neither immediate nor frictionless at present and frequently force the recipient to bear needless transaction expenses.
Stablecoins transactions facilitated by blockchain technology might enhance the speed and reliability of these transactions, which is especially important in nations with underdeveloped financial infrastructure. The regulatory climate in Asia and the Pacific (APAC) is conducive to fostering such innovation. The virtual currency has thrived in places like Hong Kong, the Philippines, and Indonesia, where there is a lack of clear regulatory direction. Though many developing Asian economies were initially behind the curve in adopting new technologies (like desktop and laptop computers), they are rapidly catching up to the technology adoption curve.
Whole populations have skipped forward to embrace new technology, with the added advantage of not having to deal with outdated systems. For example, Myanmar's mobile penetration rate in recent years increased to 90%. Similarly, Indonesia, which has one of Southeast Asia's most significant populations, has a similar tale and is currently one of the top 10 nations in the world regarding mobile internet engagement.
With the increasing demand for this service, these markets may welcome a stablecoin that has a sophisticated user interface integrated into the remittance service. More stablecoins not pegged to the US dollar are expected to be developed for use in Asia, particularly in places like Japan, Singapore, Indonesia, Thailand, Korea, and Cambodia.
Final Thoughts on Stable Coin Pegged with Local Currency
Stablecoins have emerged as an essential building block of the DeFi ecosystem in recent years. However, the US dollar has been the centre of attention for most stablecoins. Stablecoins pegged to national currencies, like the Euro, Singapore dollar, Hong Kong dollar, Rupee, South Korean won, Bangladeshi Taka or any other local currencies, are essential if cryptocurrency is to expand into use cases like real-world payments and money markets. Protocols such as Bluejay are fulfilling this demand.
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Image credits: Swapnil Bapat, Christiann Koepke and Piggy Bank.