BitMEX co-founder Arthur Hayes proposes Bitcoin-based stablecoin

Amid regulatory agencies in the United States increasingly scrutinizing stablecoins, the community continues to pitch new stablecoin ideas that are independent of the US dollar.

Arthur Hayes, co-founder and former CEO of BitMEX cryptocurrency exchange, has proposed creating a new stablecoin with a value pegged to the sum of $1 worth of Bitcoin (BTC) and one inverse perpetual swap of BTC against USD. He outlined the idea of ​​the potential Satoshi Nakamoto Dollar (NUSD), or NakaDollar, in a blog post titled “Dust on Crust” on March 8.

Unlike major reserve-backed USD stablecoins like Tether (USDT) and USD Coin (USDC), the proposed NakaDollar will not rely on any USD reserves, relying solely on derivatives exchanges that list liquid inverse perpetual swaps, Hayes said.

Specifically, the proposed stablecoin is intended to be based on a series of short BTC positions and USD inverse perpetual swaps, maintaining the 1:1 peg to USD via mathematical transactions between the new decentralized autonomous organization (DAO), NakaDAO, authorized participants (AP) and derivative exchanges.

The process of creating the NakaDollar stablecoin will be completely free of USD movements, which would require the services of banks, Hayes said. Still noting that the proposed NUSD stablecoin will not be truly decentralized, he added:

“The points of failure in the NakaDollar solution would be centralized exchanges of crypto derivatives. I’ve ruled out decentralized derivatives exchanges because they are nowhere near as liquid as their centralized counterparts […]”

The news comes amid the owner of Silvergate Bank, a major cryptocurrency bank in the United States, has shut down and liquidated its operations amid the ongoing market downturn. The shutdown came quickly after the New York Department of Financial Services abruptly ordered Paxos Trust to halt issuance of BUSD, one of the largest USD stablecoins in the market. As previously reported, Paxos had deposits with a few banks, including Silvergate and Signature cryptobank.

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Hayes is not alone in considering USD-independent stablecoins amid ongoing pressure from regulators. In February, Binance CEO Changpeng Zhao suggested that the cryptocurrency industry is likely to move to other fiat currencies as the basis for stablecoins, including euros, yens or Singapore dollars.