New IMF paper predicts that Stablecoins could in time surpass cash

16 Jul, 2019
by David Borman
News
New IMF paper predicts that Stablecoins could in time surpass cash

It is being reported by CryptoGlobe that the International Monetary Fund (IMF) has released a paper that details how Stablecoins may in fact pose a threat to both cash and bank deposits. This leads to a call for greater regulation on the part of central banks.

The paper is titled "The Rise of Digital Money" and was authored by Tobias Adrian and Tommaso Mancini Griffoli. In it, the case is made that digital forms of money could soon challenge traditional ones, of which cash and bank deposits are currently the most common.

The authors also argue that Stablecoins are more of a real threat than other cryptos, due to their low volatility. They do explore, however, the fact that Stablecoins are only as stable as the asset they are pegged to, and that credibility of issuers and volatility of underlying assets can still be a problem.

From the paper:

"However, we know too well the common fate of pegs. When a country’s economic fundamentals are off-kilter, the central bank can run out of the foreign exchange reserves needed to purchase domestic currency in the marketplace. Providers of managed coins can also run out of assets to support the price of their coins, especially because they may stand on shaky fundamentals—use determining value, and value encouraging use."

The paper goes on to propose that central banks team up with electronic money providers and that this could allow for banks to have regulatory oversight over the "currency" created:

"One solution is to offer selected new e-money providers access to central bank reserves, though under strict conditions... Doing so raises risks, but it also has various advantages. Not least, central banks in some countries could partner with e-money providers to effectively provide ‘central bank digital currency (CBDC)’, a digital version of cash."

Some crypto purists would likely balk at a "central bank digital currency," but it could be the way of the future. Will other banks feel the same way? Stick with Chepicap for all updates!

 

Read more about: Stablecoin IMF

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