Stablecoins might re -boot us ‘Exorbitant Special Rights’: Mike Dolan
The increasingly anxious debate about the resurrection of “stablecoin” which is exiled by the dollar has begun to think about the resurrection of the dominance of global dollars rather than “de-dolarization” that has long been discussed. But the nature of his personal sector adds to a significant anxiety.
Stablecoin dollar, which is pegged to the US dollar and offers instant settlement, is used by crypto traders to move funds between tokens. They were given a shot on the arms by the July “Genius Act” Framework at the US Congress, which required stablecoin to be fully supported by liquid assets such as cash and treasury bills.
Stablecoin has enjoyed rapid growth, with their joint market capitalization more than doubled in the last 18 months to nearly $ 280 billion- and some projections have this reaching $ 2 trillion in three years. US treasury praised the explosion of potential demand because of its developing debt.
However, they still represent only about 1% of global transactions and are still rounded errors compared to the global government bond market of $ 100 trillion.
Although dominated by two giant tether and circles, which together form more than 80% of the total size, the number of stablecoin is developing.
But 99% of the universe is still supported by dollars even though most transactions occur outside the United States.
And this feature is that many regulators and central banks are increasingly looking at checking the potential stablecoin to ever represent most of the flow of global money and cross -border transactions.
It was unthinkable, considering that stablecoin offers a rapid settlement and the ability to avoid exchange control, border tax and international sanctions – attributes that can be more interesting in an increasingly unsteady geopolitical environment.
China, for example, has focused on risk. Until recently, Beijing was only committed to the development of sovereign digital yuan, but the government is now examining the increasing use of stablecoin that is supported by Yuan. Is it too late for that or other governments to catch up still need to be seen.
‘Inherent fragile’
Many potential risks to the international financial system are detailed in this week by Economist Helene Rey in Financial Magazine and International Monetary Fund Development, where he argues that regulators need to get relatively blurred digital currency data in the world than slower than slower.
Rey acknowledged the potential for efficiency excellence that could be offered by stablecoin in cross-border transactions, especially in unstable countries with weak governance, but he also described a list of withered risks.
“On the negative side is dolarization and side effects, the risk of financial stability, protective potential from the banking system, currency competition and instability, money laundering, basic fiscal erosion, seigniorage privatization, and intense lobbying,” he wrote.
In particular, he highlighted the dangers that could arise if the stablecoin remained very supported by dollars, because this could reduce the demand for non-US government bonds to support the treasury. Indeed, IMF data shows that US bonds that support tether and circles have exceeded the debt of the Saudi Arabian government.
“This stablecoin can be a digital pillar that strengthens the exorbitant rights of US dollars,” he wrote.
This can cause a seismic portfolio shift and encouragement for one account unit, with the most obvious candidate dollar given a large beginning.
And the development of stablecoin can also produce new financial infrastructure that is far more fragile. The government might be able to rely on technology companies to maintain some of the controls of this universe, said Rey, but the co-existence of various private sector networks that have the potential to compete can damage the entire monetary system and lead to a world that is “inherent”.
Considering how relatively the small stablecoin industry is still, this might all seem too apocalyptic.
But the track is sufficient for planning contingency-paling how it can be used with US policy upheaval on the whole world and with a worrying pile of government debt piles, long-term inflation fears and skyrocketing gold prices.
Europe also targets the universe with carefulness, exploring how to maintain relatively tight control over the development of crypto and stablecoin even when preparing laws for digital euros.
European Central Bank President Christine Lagarde said last week that the legislator must demand “protection” and “strong equality regime” from Stablecoin foreign publishers to prevent the risk of carrying out reserves held in Europe.
Federal Reserve also announced last week that they will host the payment innovation conference next month, some focus on stablecoin and tokenisasi.
But of course it will be ironic if Crypto – part of the financial sector born from skepticism about dollar stability – eventually becomes a thing that strengthens the dominance of greenback over time.
Source: Reuters
