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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
(plural noun) Digital assets whose value is pegged to another asset
Conversations about stablecoins usually begin with what they’re not.
Digital money? Almost. Pegging a crypto token’s value to a real-world currency (almost always the dollar) makes it look like money. But even with one-for-one reserve backing — as mandated by the Trump administration’s Genius Act, passed in July — its relationship to money remains one step removed. Not everyone wants to be confronted by foundational concepts like singleness and supply elasticity while buying groceries.
Payment rails? Almost. There is a logic to putting dollars on the blockchain, particularly in the …
Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
(plural noun) Digital assets whose value is pegged to another asset
Conversations about stablecoins usually begin with what they’re not.
Digital money? Almost. Pegging a crypto token’s value to a real-world currency (almost always the dollar) makes it look like money. But even with one-for-one reserve backing — as mandated by the Trump administration’s Genius Act, passed in July — its relationship to money remains one step removed. Not everyone wants to be confronted by foundational concepts like singleness and supply elasticity while buying groceries.
Payment rails? Almost. There is a logic to putting dollars on the blockchain, particularly in the US, where merchant fees are artificially high. Small payment systems work just fine nearly everywhere else, however, so stablecoins for daily use looks like a solution seeking a problem.
Remittance systems? Almost. Some may value moving money across borders, 24/7, without the friction of security checks. But while a clearing house may cost more, it provides someone to blame if something goes wrong.
Exchange traded funds? Almost. But ETF issuers rely on independent auditors and custodians. Stablecoin issuers such as Tether, the world’s biggest, prefer a more DIY approach.
The point here is that many money-like products already exist. They are tightly regulated and issued under conventions hardened by crises. Stablecoins were born of a desire to bring new customers to the crypto casino. Secondary uses like funding illicit trade stem directly from regulatory ambiguity.
Stablecoins may benefit the US, which has a lot of dollar-denominated debt to sell. The challenge for others countries is to justify why private money should exist alongside their own currencies, while resisting the temptation to regulate stablecoins like something they are not.