Coinbase Has Plans To Create Inflation-Pegged Stablecoin

By Kevin • March 27, 2023 11:27 am • Comments

Despite all the regulatory scrutiny that Coinbase is now getting from the SEC, it looks like the exchange is continuing to be active when it comes to innovation and business diversification.

It was just revealed that the company is looking to create something called a “flatcoin” which is basically an inflation-pegged stable coin.

This is quite different from most other stable coins which aim to be backed by the value of the US dollar and the exchange expects that this coin is backed by the “price of living”.

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The actual mechanics of how it will get its value is still unknown as it is uncertain how exactly this “price of living” will be tracked accurately and what assets are being used to actually back the value of the flatcoin.

Additionally, Coinbase shared that they expect such a flatcoin to be created on its own Base network.

Watcher.guru reports:

The launch of the Base network garnered interest. Now, the layer-2 network’s first step is the creation of an inflation-pegged flatcoin.

In light of the current financial crisis, Coinbase stated that it is now “more important than ever” to create an inflation-tracking stablecoin that contradicts central banks’ flawed monetary policy decisions.

Elaborating on the same, Coinbase wrote,
“[We] are particularly interested in ‘flatcoins’ — stablecoins that track the rate of inflation, enabling users to have stability in purchasing power while also having resiliency from the economic uncertainty caused by the legacy financial system.”

Furthermore, since these assets would be tied to inflation rates, they are expected to retain their value over time. This option is particularly useful in nations or states with high inflation rates, as buyers may be reluctant to keep their savings in local currency owing to its volatility.

Whether or not the idea of a flatcoin will be successful or not is still unknown, but it helps to have an asset not backed by the USD which suffers from inflation.

Timeline for when the launch of this new flatcoin has not been announced yet nor has the company revealed any specific info on this new Base network being launched.

With that being said, prominent investors like Ray Dalio have expressed interest in such inflation-linked coins as it would protect the buying power of consumers which may give it some credibility.

This announcement also comes during a time when the exchange announced that it is looking to build an overseas exchange operation which makes the company less dependent on the US market.

CoinTelegraph reports:

While most stablecoins are pegged to a reference asset such as the U.S. dollar, flatcoins aim to be pegged to the “price of living” by tracking consumer price index and inflation data.

Coinbase added that it is also open to other ideas that “fill the space” between fiat-pegged stablecoins and volatile cryptocurrencies.

The concept has the approval of investor Ray Dalio too, who recently said that he would like to see an “inflation-linked coin” to ensure that consumers can secure their buying power.

“The closest thing to that is an inflation index bond, but if you created a coin that says OK this is buying power that I know I can save in and put my money in over a period of time and transact in anywhere, I think that would be a good coin,” he said.

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