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Facebook's (NASDAQ:FB) Libra has some competition, as the world's biggest cryptocurrency exchange, Binance, has revealed a new blockchain project called "Venus" that aims to create regional stablecoins collateralized by local fiat currency.

Binance says Venus will use Binance Chain, its public blockchain technology, “to empower developed and developing countries to spur new currencies.”

In a blog post, Binance describes the project as an "initiative to develop localized stablecoins and digital assets pegged to fiat currencies across the globe.” Binance says it is actively looking to engage governments as stakeholders in this project, in contrast to Facebook's Libra,which has received a chilly reception from governments around the world.

“Binance welcomes additional government partners, companies and organizations with a strong interest and influence on a global scale to collaborate with us to build a new open alliance and sustainable community,” Binance said in a statement.

Why Do We Need Stablecoins?

Stablecoins are an important part of the cryptocurrency ecosystem as they bring stability to an otherwise turbulent market. Bitcoin is notorious for its wild bull and bear markets, with the price known to fluctuate an enormous amount over the course of a day. Thisvolatility chasm, stops Bitcoin from being a Medium of Exchange and Unit of Account; settlement of a deal is going to be tough when the value of the Medium of Exchange swings wildly. This is why for the few deals that are settled in Bitcoin, the price almost always referred to in Dollars and not Satoshis.

Thus, enter the stablecoin. By pegging the value of the coin to a stable asset -- mostly USD -- this provides an effective on-ramp, hedge, or exit ramp for traders looking to exchange their fiat and crypto. This is why Tether, which is the leading stablecoin pegged to the USD, has some of the highest -- if not the highest -- trading volume on the market.

Although stablecoins are only in their infancy the future use cases for them would likely be international payment settlement, to international remittances.

Why This is Important: Stablecoins, Venus, and the Almighty Dollar

To date, the majority of stablecoins, including Facebook's Libra, are pegged to the US Dollar. The most liquid crypto-fiat currency pairs involve the US Dollar. While this might make sense considering that the USD is the world's reserve currency, there is interest around the world in applying the concept of a stablecoin to currencies other than the USD, as the fear is if stablecoins are successful, and prove useful to the world, having the majority of them pegged to the USD would only further the currency's hegemony.

This is why China's central bank, the People's Bank of China, is actively working on an RMB-backed stablecoin:

"If [Libra] is widely used for payments — cross-border payments in particular — would it be able to function like money and accordingly have a large influence on monetary policy, financial stability, and the international monetary system?” Wang Xin, director of the PBoC Research Bureau, is quoted as saying. “If the digital currency is closely associated with the US Dollar, it could create a scenario under which sovereign currencies would coexist with US Dollar-centric digital currencies. But there would be in essence one boss, that is the US Dollar and the United States. If so, it would bring a series of economic, financial and even international political consequences.”

China sees the potential of stablecoins as a way the USD only tightens its grasp on the world economy, hence its efforts to develop an RMB-backed stablecoin to help further internationalize the RMB.

Binance senses an opportunity to help strengthen regional currencies. Secondary currencies, such as the Thai Baht, Korean Won, Turkish Lira, will have more international clout as the USD will no longer need to be the default currency for international transactions.

Binance has yet to provide a timeline or release date for this project.