Stablecoins Poor as Money BIS Warns
The Financial Times writes, "Stablecoins 'perform poorly' as money, central banks warn." They tell us, "Top central bankers have delivered a scathing assessment of stablecoins, saying they 'perform badly' on key requirements for being widely used as money, disavowing US President Donald Trump's push to make them a pillar of mainstream finance. The Bank for International Settlements said stablecoins fail the three main tests of any money because they are not backed by central banks, lack sufficient guardrails against illicit usage and do not have the flexibility of funding needed to generate loans." The piece says, "Stablecoins are designed to act as a bridge between volatile crypto assets such as Bitcoin and traditional monetary systems by tracking the value of fiat currencies with one-for-one backing in safer assets such as government bonds and money market funds. Their creators boast that by transferring money over the internet, they are more efficient than international bank transfers. However, the fact that they can be held anonymously has made them popular with crypto traders and a conduit for crime including drug trafficking and money laundering." The FT adds, "Hyun Song Shin, head of the BIS monetary and economic department, told reporters that stablecoins carried the risk of rapid withdrawals by investors. “It’s really asking, if there are such redemptions in the stablecoin space, what would be the consequences? Governments in the US and UK are introducing regulatory frameworks for stablecoins in response to their growing usage. There are about $250bn in circulation already, dominated by dollar-based tokens such as Tether and Circle's USDC."
