Regulating global stablecoins

Consider the challenges of facilitating retail consumer payments by issuing digital currencies — monetary currencies that are evidenced electronically and not in physically tangible form. Two types of retail digital currencies are likely to become feasible in the near future: central bank digital currencies (CBDCs), which are sponsored by governmental central banks; and stablecoins, which are non-government issued digital currencies that are backed by “reference assets” having intrinsic value, such as government fiat currencies. In contrast, Bitcoin and other privately issued cryptocurrencies that are not backed by reference assets are unlikely to become successful consumer currencies because of their unpredictably fluctuating value.

I will focus in this paper on stablecoins that become widely used internationally (referred to here as “global stablecoins”). The use of stablecoins is becoming more widespread all the time, with the total stablecoin market cap approaching $200 billion at writing.