El Salvador is set to launch a stablecoin pegged to the US dollar

New stablecoin issued by El Salvador coming soon

On Wednesday Galoy, a banking platform in El Salvador that launched the Bitcoin Beach Wallet in November 2020 in the city of El Zonte v Salvador, announced the launch of a new dollar-pegged stablecoin.

The new stablecoin was a synthetic dollar backed by Bitcoin. These are coins called Stablesats that do not require tokens to function and can be easily spent. In order to improve its platform and for this new project, the company also announced that it has raised $4 million in capital.

Hivemind Ventures led this funding round with participation from Valor Equity Partners, Timechain, El Zonte Capital, Kingsway Capital, Trammel Venture Partners, AlphaPoint and other leading Bitcoin investors.

A message from the company reads:

“Today the company announced the launch of Stablesats, an alternative to stablecoins, integrating fiat banks using stablecoin derivative contracts to create a Bitcoin-backed synthetic dollar pegged to the USD. This enables dollar-equivalent USD accounts in the Lightning Wallet, which solves one of the biggest problems of day-to-day transactions with BTC: short-term exchange rate volatility.

The message continues:

"There is no stablecoin or token other than Bitcoin that underpins Stablesats, which means better interoperability and lower fees for users."

This means there is no third party to control it, which some say is an important tool in the hands of countries with high inflation and heavy exposure to US dollars.

What will be the benefits of the new stablecoin for the whole ecosystem

As Nicolas Burtey explained:

“With the Lightning wallet powered by Stablesats, users can send, receive and hold money in a USD account in addition to their default BTC account. While the dollar value of their BTC account fluctuates, $1 in their USD account remains $1 regardless of the Bitcoin exchange rate”.

It is essentially a derivative product whose pioneering work is credited to Bitmex, who first talked about it in 2015 as a solution to the very high volatility of BTC and other digital currencies.

“We are seeing the integration of multiple exchanges, hedging strategies and currencies that are building resilience. Finally, we can unlock the ability for every Lightning user to choose their own entities without leaving the network.”

The Galoy platform has also recently developed a digital wallet in Costa Rica and Panama and has long considered that will open its business to other South American countries as well.