Stablecoins are often highlighted as being one of the most critical forms of digital assets for mass adoption in both institutional markets and web3. They can be defined as a token designed to maintain stable value (‘par value’) with regard to an underlying fiat currency, backed at least one-for-one by a mix of cash and cash-equivalent reserves and/or other high-quality liquid assets (HQLA) denominated in that currency. Stablecoins may be used for payment and settlement purposes across a wide range of use cases spanning both traditional and digital finance.
In the future, it is likely that stablecoins, alongside other new forms of digital money, will co-exist and interoperate across the current financial services ecosystem, each taking on a specific role and addressing different niches in the ecosystem.
However, as stablecoins are frequently exchanged at a slight deviation from par with their referenced fiat currency, some policymakers have argued that this phenomenon means that stablecoins do not meet the criteria of ‘singleness’, the principle that all forms of money in an economy, whether physical or digital, should be valued on a one-to-one basis at all times and in all circumstances. Accordingly, they argue, they are unsuitable for large scale adoption or use in financial markets as money.
This Roundtable aims to discuss:
(1) The unique characteristics of stablecoins and their potential to support financial system innovation;
(2) The arguments both for and against stablecoins – including both risks and risk mitigants, nuances around the singleness of money, dollarisation/de-dollarisation, volatility;
(3) Safe innovation in stablecoin markets; and
(4) The regulatory frameworks or other solutions needed for wider adoption.
