Why stablecoins may not replace fiat currency, as per BIS Chief
Agustin Carstens, general manager at the Bank for International Settlements, stated in a 22 February speech that the events of 2022 have “severe questions on the ability of stablecoins to serve as money.”
According to Carstens, the head of the organization of central banks from across the world, stablecoins, which are cryptocurrencies tied to the value of other assets like sovereign currencies, do not benefit from the regulatory standards and protections that apply to bank deposits.
Regulators and lawmakers all around the world had reservations about these cryptocurrencies. Surprisingly, the reservations were there even before the shocking collapse of Terra [LUNA] in May. This prompted a bigger crypto market collapse and a string of high-profile bankruptcy filings in the industry.
World standard-setters have issued a warning that many stablecoins now in use might not follow the strict guidelines they have set for issuers this year.
Instead, Carstens praised tokenized deposits and central bank digital currencies that use cryptocurrency-related technologies but uphold the “trust” offered by public systems. Carstens had previously criticized stablecoins, as they might hand control of monetary systems over to private organizations that are “driven by profit.”
Yet, Carstens continued, one can learn significant lessons from stablecoins from the standpoint of public policy. Primarily, stablecoins offer several features not offered by fiat money.
To avoid the private sector “stepping in,” central banks must embrace new technologies and seek to innovate. The BIS gave the go-ahead for central banks all around the world to start investigating national digital currencies in 2021. More than a hundred countries are now debating
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