On-chain Forex
An on-chain Forex market could solve the issues met by non-USD stablecoins...

Ramp to foreign liquidity

Forex is the largest traditional financial market with a daily volume of $6.6 trillion. It is mainly used for non-speculative use cases, like buying or selling currencies for investing in foreign securities. For example, a Japanese bank would need to exchange JPY for USD for investing in AAPL.
In this case, Forex is used as a ramp to access foreign liquidity.

Ramp to deepest liquidity

In order-book-based crypto exchanges, the most liquid markets are quoted against USD. For example, on Kraken, buying 1 BTC with EUR or AUD costs more than buying it with USD. Someone with AUD would better exchange them for USD and then buy BTC.
In AMMs-type exchanges, USD-stablecoins are the most liquid and spread stablecoin. Rather than competing with USD-stablecoins for liquidity, it is more efficient to build an on-chain Forex market allowing users to swap their non-USD stablecoins for USD one to leverage the latter's liquidity.
In this case, Forex can be used as a ramp to access the most liquid markets.

An on-chain Forex market

Building an on-chain Forex market is possible using AMMs, but despite the recent innovations like concentrated liquidity or cross-asset swap, it remains very capital-inefficient to build liquidity on AMMs, especially for crypto-collateralized stablecoins. Eventually, Forex pools on an AMM can only work if arbitrages can be performed on a primary market where trade can happen at the real market price.
The Synthereum protocol enables a capital-efficient on-chain Forex which guarantees the exchange of jFIATs at the real market price, without price impact, granting them access to the USDC liquidity.
Copy link
On this page
Ramp to foreign liquidity
Ramp to deepest liquidity
An on-chain Forex market