Stable Coin as a Service

A Stable Coin, backed by Fiat Money

Stable coin is a term used to describe digital tokens representing stable values. While other tokens, like cryptocurrencies face volatility, stable coins trade at parity with fiat currencies, like the US Dollar or the Euro. In NEXUS, stable coin prices are always pegged at a one-to-one ratio to the fiat currency, which is held in a reserve as collateral. That means a buyer who pays one Euro for a stable coin, has a guaranteed future buy back of one Euro. Stable coins stabilize an otherwise volatile token-ecosystem.

Stable Coins are unlike conventional cryptocurrencies because there is no limited supply or fixed schedule. Instead, the amount of stable coins in a system is directly connected to the amount of deposited fiat money on the escrow bank account and the withdrawal of stable coins from the blockchain ledger.

The NEXUS Stable Coin solution is developed by Quantoz, a Dutch innovative startup, founded in 2015 and located in Utrecht. Quantoz provides the technical infrastructure “NEXUS”, an end-to-end SaaS solution that enables businesses to easily integrate public blockchain infrastructure in their existing financial applications and manage tokens like digital currencies without the need to deal with the technical aspects involved.

NEXUS enables companies to issue their private coin in a “Closed Loop” Eco-System as is defined in the PSD2 directive[i]. Such an Eco System has at least five roles in a so called virtual private payment network.

  • 1
    The Issuer
    The Issuer issues the token guaranteeing a fixed exchange rate with a so called “pegged token” to all participants in the system. When issuing the token, the corresponding value in pegged token is reserved by the issuer in a specific custodian account on the blockchain. The pegged token is connected to the currency (for example Euro) held on the escrow bank account of the token issuer and is called ‘Cash on Ledger’. This enables a transparent accountancy check on the full reserve status of the pegged token.
  • 2
    Merchants can create an account and sell their services in exchange for tokens. They can sell the earned tokens back to the issuer.
  • 3
    Customers (consumers) can create an account, buy tokens from the issuer and spend their tokens with merchants (or other customers). 
  • 4
    Financial Institution
    A bank to offer escrow accounts for the fiat currencies it supports.
  • 5
    An independent Auditor needs to be appointed to audit the Eco System.

The transactions in the system have a very low transaction fee (depending on the underlying ledger this can be Stellar Lumens (XLM) or Ethers (ETH)). The customers and merchants don’t have to pay this fee and don’t have to be aware of this happening at all. The fee is paid in cryptocurrency by the issuer. An example of fiat money and stable coin flows in one eco-system is displayed below.

  • The consumer sends money to the issuer’s escrow bank account. Upon receipt of the money, NEXUS will automatically create the related number of tokens (stable coins) and send these tokens to the consumer’s wallet.
  • The consumer can pay with the tokens for example at a web shop. The merchant sends the goods or provides the service upon receipt of the tokens in the merchant’s wallet.
  • The merchant sends the tokens to the issuer’s wallet. NEXUS will then burn the tokens and the issuer will send the fiat money from the escrow bank account to the merchant’s bank account.

An independent auditor, checks if the number of tokens in the consumers’ and merchants’ wallets is covered by the fiat money on the escrow bank account. Issuer, consumers and merchants together form a closed loop eco-system. The exchange between fiat money and token can only be carried out by the issuer via the issuers’ escrow bank account and escrow digital wallet. It is also the only place where fiat money can enter or leave the eco-system.

A NEXUS stable coin eco-system operates as a fully compliant permissioned system: before participating in the eco-system, identification and verification of merchants (KYB) and consumers (KYC/AML) is mandatory.

Stabilization Mechanisms

The stabilization mechanism at the core of a stable coin solution is crucial to determine if it can maintain a stable value or not. There are different types of solutions and stability differs:

  • The NEXUS mechanism described above is backed by 'funds’ and is called ‘Cash on Ledger’. This means that the issuer or custodian needs to hold funds for safekeeping, implying a commitment to their full redeemability. Cash on Ledger does not involve a new type of asset but represents an existing fiat currency on a distributed ledger. The value of the stable coins is therefore truly stable in terms of the currency in which the funds are denominated.
  • Another type is a coin backed by traditional assets, called “off-chain collateralized stable coins”. NEXUS will support this type in the future. The coins backed by traditional assets require a custodian for their safekeeping and are in the possession of the issuer only as long as the user does not redeem the coins.

Other types of solutions, which are not on the NEXUS roadmap as they are perceived to be less stable, are ‘on-chain collateralized stable coins’ and ‘algorithmic stable coins’. On-chain collateralized stable coins are typically backed by crypto-assets, which can be recorded in a decentralized manner and do not need either an issuer or a custodian to satisfy the claim. Algorithmic stable coins are backed by users’ expectations about the future purchasing power of their holdings, which does not need the custody of any underlying asset, and whose operation is totally decentralized[ii].

The Advantages of the NEXUS ’Digital Cash’ Eco System

The NEXUS Digital Cash solution enables companies to create an eco-system in which merchants and customers can exchange tokens pegged to a fiat currency with a guaranteed exchange rate. NEXUS provides a turnkey “SaaS” solution to facilitate this process. NEXUS SaaS and APIs enables the issuer to directly start integrating tokens into its business while maintaining focus on their core competence. The issuer does not need to have knowledge about digital wallets, crypto trading or crypto handling and can rely on proven technology, already more than three years in operation.

The NEXUS digital cash solution is a competitive cost-efficient infrastructure. It is cheaper than in-house development, reduces development risks, reduces operational risks and enables clients to offer new disruptive services rapidly.

NEXUS is also fully compliant. The solution offers fully auditable bookkeeping between fiat and token transactions. All transactions and operations are fully traceable. The solution is a closed loop and wallets can be frozen in case they are stolen or lost. The user interface is completely intuitive. No technical skills are needed to operate the system. In addition, the fully automated processes reduce errors.

NEXUS Stable Coin Core Features

Gateway to payment processors

  • Supporting instant payment methods (standard and custom): Interfaces with multiple payment methods, including credit card, to enable integration with existing financial (fiat) banking systems.
  • Robust technology to support instant multi-crypto, multi-currency transactions.
  • Call-back functionality of transactions to notify merchants and/or other parties of any changes.

Support and implementation

  • 24/7 available Health Status Dashboard with a comprehensive overview of the NEXUS system status, including servers, API calls, transactions, wallets and connection to exchanges.
  • A comprehensive set of APIs for integration with backend systems, web-pages and apps.

Customer and account management

  • Onboarding, compliance functionality: Compliant customer management (AML, KYC) tools. NEXUS generates compliance reports accepted by AA- (Fitch rating) banks.
  • Trust levels to limit customer transactions according to compliance requirements.
  • Transaction history and balance reporting.

Hot-wallet service for instant transaction processing

  • Token issuing, blockchain account/address management: An infrastructure for wallet and blockchain databases management.
  • Signing of token transactions, hiding the transaction fees for the consumers and merchants.

Stable coin reserve

  • Value of circulating tokens to be validated against collateral on escrow bank account: the eco-system is audited by an independent third party. The auditor checks if the amount of issued coins reserves together with the coins that are in circulation on merchant and consumer wallets is equal to the fiat reserve in the escrow account ('full reserve').
  • Trading & transfer service to provide native crypto liquidity, necessary for transaction payment.
  • Automate reserve position with minimal price & counter party risk: Trading algorithms that minimize price & counter party risks through automated crypto position balancing.
  • Custody service: (un)freeze accounts in case a digital wallet is stolen or lost.


[ii] Bullmann, D., Klemm, J., & Pinna, A. (2019). In search for stability in crypto-assets: are stablecoins the solution? Frankfurt am Main: European Central Bank