How yZar answers the stablecoin security question

Stablecoins are growing – and not only in developed markets like the United States. “I think something that very few people are aware of is that stablecoins are growing massively in Africa,” Bloem said. “Globally, last year, the market cap of stablecoins was around $250 billion, and $5.7 trillion in transactions were processed. Especially in the Sub-Saharan Africa community, many people think that the majority of crypto volumes are driven by Bitcoin. But in fact, crypto volumes are driven by stablecoins, with 43% of crypto transactions happening in stablecoins.”

Against that backdrop, Mesh has launched yZAR, a yield-bearing stablecoin that’s pegged 1:1 to the South African Rand. It puts idle capital to work by turning investors’ ZAR into a guaranteed-yield-generating asset.

“I think we all have, on a daily basis, balances just sitting in our bank accounts, not doing anything,” said Bloem. “We know that savings accounts and savings pockets earn less than 2% interest at this stage. yZAR is absolutely a competitive solution to that. Bigger players in the financial markets – financial advisors and institutions – have idle money also sitting there waiting to be deployed, but they cannot lock that up until their opportunity comes around, and sometimes that opportunity is instant where you need to dive into the market. So this is something that gives them a lot more tools to react with.”

That’s the “Why?” of yZAR, then. As Bloem framed it: “At Mesh we’ve always been confronted by one very simple problem statement: idle money earns nothing. It’s just sitting there. Every time someone funds their account and they’re waiting for a transaction, or they can’t figure out what to invest in, they have this idle cash sitting around. yZAR is the answer to that.”

During the MoneywebNOW conversation, Bloem highlighted an important – and often overlooked – aspect of stablecoins in general, and yZAR in particular. That’s the question of security.

“We wanted to create a lot more security around these stablecoins because I think something that is not spoken about enough in the market is bankruptcy remoteness,” she said. “I don’t want you to be sitting with Mesh credit risk. It needs to be in structures that are bankruptcy-remote from our operations. You need that guarantee, as a holder of these assets, that no-one will get their fingers into your proverbial cookie jar.”

That protection is provided by yZAR’s unique structure. Both of Mesh.trade’s ZAR stablecoins – the mZAR settlement coin and the yield-earning yZAR stablecoin – are underpinned and backed by Rands, in safe accounts at some of South Africa’s biggest banks. “That makes sure that, from a backing perspective, each coin is backed by one Rand at all times,” said Bloem.

And while yZAR is fully backed 1:1 by mZAR, which in turn is fully backed 1:1 by ZAR, that ZAR is held in a segregated, bankruptcy-remote, special purpose vehicle- (SPV) controlled account, being implemented via Mesh Mint (RF) (Pty) Ltd.

“We have put this into an SPV structure, which is leading in the market currently from a bankruptcy remoteness point of view,” said Bloem. “Very few other players are actually putting it into these kinds of structures. What it means is that if something goes wrong in the market, or if something goes wrong in the Mesh setup, your money will still be protected, and you can still get to that capital base of yours.”

To invest in yZAR, register for Mesh.trade and view the asset overview.