Stablecoins: A Nuanced Look at Thier Future
The Bank for International settlements (BIS) recently questioned the viability of stablecoins, arguing they fail three key criteria: singleness, elasticity, and integrity. Though,this critique may not fully capture the practical realities of stablecoins.
Singleness: Not Always Absolute
Stablecoins like USDC and USDT can temporarily deviate in value,similar to bank deposits during crises. Yet,they still redeem at a 1:1 ratio and function even when banks are closed. This shows that singleness isnât always perfect in traditional systems either.
Elasticity: A Different Approach
While stablecoins require upfront cash for issuance, their transactions settle instantly on the blockchain. Banks, on the other hand, rely on settlement delays to create liquidity. Mechanisms like flash loans demonstrate that elasticity can be coded into stablecoins, providing instant liquidity without bad debt risks.
Integrity: A Two-Sided Coin
Traditional banking systems intercept less than 1% of financial crimes. In contrast, blockchain transparency allows for better tracing and recovery of stolen funds in crypto. This suggests that stablecoins might offer a more secure option.
work in Progress
Stablecoins are still evolving. While they havenât reached mainstream adoption, they preserve value, move efficiently, and maintain trust in ways traditional banks canât. The market is growing, but predictions have been revised. JPMorgan now forecasts a $500 billion market by 2028, down from earlier trillion-dollar estimates.
Ultimately, stablecoins donât need to mimic banks to succeed. They just need to fulfill the core functions of money. The future of finance should focus on building systems that work for users,not just defending legacy models.
