Following a volatile year in crypto markets, stablecoins are gaining momentum in 2019. Since the first stablecoins emerged in 2014, there are now more than 50 different stablecoin projects available to date.

Stablecoins’ growing prominence suggests a shift in the crypto market — one that is free from the historical volatility of cryptocurrencies, and, many believe, the path to mainstream adoption in the traditional finance world. This is because stablecoins offer a reliable on-and off-ramp for investors, providing the legitimacy associated with traditional fiat currencies, increasing transparency, and removing the need for multiple costly transfers between crypto and fiat currencies.

In turn, the blockchain industry is now successfully linking legacy finance with blockchain-based assets. One major market in particular that stands to benefit from stablecoins and the supporting blockchain technology is real estate finance.

Transactions in this market are complex, since they involve many intermediaries and details surrounding contractual, legal, and compliance elements, along with regular servicing. Moreover, once these investments are issued, they have historically been illiquid. This is partly due to the lack of transparency throughout the capital stack, making it difficult to accurately value the different constituents in a capital market transaction.

Blockchain technology companies are beginning to recognize the size of this opportunity. For example, one such company has successfully launched the first real-world application of a stable coin being applied in structured finance today. Fluidity Factory has released a real estate token called FACTOR-805, which will allow investors the option to both make payments and receive interest in Dai, the digital asset-backed stable coin from MakerDAO, which has maintained a soft peg to the U.S. Dollar since it was created in 2017.

FACTOR-805 is a new condominium and retail construction financing near completion, located steps from the Brooklyn Botanic Garden in New York. It is the first of its kind in the United States to incorporate a stable coin into a transaction.

“FACTOR-805 is a breakthrough. It’s a powerful example of how to unlock more value from investments by bringing real world assets to the blockchain,” said Rune Christensen, Founder and CEO of MakerDAO. “With Dai, investors get the speed, security and efficiency of a cryptocurrency without the volatility that typically defines the space.”

Fluidity Factora is a blockchain technology company formed by the recent union of Fluidity and Propellr, a structured finance platform with years of expertise in private securities and an integrated broker dealer. The combined team is upgrading financial infrastructure by refactoring real world assets as blockchain tokens.

“We believe in the Dai stablecoin and are pleased to incorporate it into FACTOR-805. MakerDAO is an amazing project whose technology provides an essential component to the expanding token ecosystem,” added Todd Lippiatt, Co-Founder and CEO of Fluidity Factora.

Evolution Through Stablecoins

Adoption of this ingenious hybrid — the first tokenized structured debt security, and the first integration of stablecoin for payment and interest — will require buy-in from both investors and the issuers providing the opportunities. Once this is achieved, evolution in this market is possible with stablecoins and blockchain technology. Ultimately, this will bring all parties involved together in a common system, streamlining the mechanics to track and transfer ownership.

“It’s an exciting development for both the crypto and structured finance world to see the way emerge for us to build a viable bridge between the two,” said Donna Redel, former Chairman of COMEX and member of the World Economic Forum.

Moreover, necessary components like compliance and investment servicing can be automated with blockchain-based smart contracts. Also, all elements of the capital stack represented as tradeable tokens could help increase transparency, allowing investors to assess a deal and offer in a standardized manner for the first time, with a cryptocurrency that is structured to be stable.

“Transparency allows liquid markets to emerge with the confidence they deserve. Factora’s efforts provides the necessary components to build a comprehensive token ecosystem for mainstream adoption,” said venture capitalist, Bill Tai.

Source: Forbes