The International Monetary Fund recently released their latest blog post, 'Digital Currencies: The Rise of Stablecoins', the first of a two part series covering digital currencies.
Stablecoins are forms of digital currency which are designed to remain stable in price, and this is usually achieved via the token/coin being "backed" by anther asset. The most well known stablecoin in the cryptocurrency world is the much maligned Tether, which may only have 75c USD behind each Tether (which trade for USD$1). Libra is another major pending stablecoin and the recent announcement of that project is no doubt a driver of further consideration of stablecoins by regulators.
The IMG blog correctly notes:
Stablecoins offer the potential for better integration into our digital lives and are designed by firms that thrive on user-centric design.
However, the blog highlighted risks to the existing financial service providers and banks of widespread stablecoin adoption, ranging from the threat of imminent monopolies, to banks losing their place as intermediaries of transactions.
The blog concludes by stating:
Stablecoins thus present as many conundrums as they do potential benefits—and policymakers would be wise to envision far-sighted regulatory regimes that will meet the challenge.
The second edition is promised to give more detail into at least one avenue of policy that the IMF may intend to pursue on this issue. As always, the IMF Blog is not an official statement of the IMF's position on any particular issue, but it is good to know that the challenges and potential regulatory responses to the rise of stablecoins is being properly considered by those involved in the IMF.
Read the first edition of this series here, and we will provide an update of part two when it is released.