Grain-backed crypto challenges “stablecoin” definition

Agrotoken, an Argentinian startup tokenizing grain by the ton through cryptocurrency, announced that its soy-, corn-, and wheat-backed coins will be accepted as collateral by Santander. Agrotoken has also launched a 1,000-farmer test with Santander.

Why should we care?
This partnership symbolizes growing interest in commodity-backed “stablecoins.” Coins within this new crypto class are pegged to a material good, arguably rendering them more stable than traditional cryptocurrencies. But commodity-backed stablecoins aren’t pegged to a fiat currency, muddying the current definition of “stablecoin” to include commodities that can fluctuate significantly in price. According to Accenture, which evaluated Agrotoken’s work in a case study, the system “would allow farmers easy, fluid access to a new system of credit at competitive rates.” Farmers can also trade the coins on commodity and crypto exchanges, and pay for goods and services with merchants who accept the coin. But it’s hard to gauge how these coins won’t further exacerbate the geopolitical volatility of food markets, especially since they further integrate the price of agricultural commodities into the financial health of agricultural producers. The Russian invasion of Ukraine has already significantly affected wheat prices, which reached record highs over the weekend. A troubling wheat shortage looms; Agrotoken and its supporters will have to demonstrate whether—or how—its technologies can create more resilient food systems over time.