Go to search feature Go to content

Can stablecoins challenge today's payment systems?

Johan Javeus

The US President Donald Trump recently signed a law aimed at promoting so-called stablecoins – digital crypto assets with a stable value tied to the US dollar. In a column, senior economist Johan Javeus explores how increased use of stablecoins could affect the payment system, our perception of money, the role of the Federal Reserve, and the status of the dollar.

What risks and possibilities does an increased use of stablecoins entail? Below are some of the key points from the column. 

  • Stablecoins have gained more acceptance in the U.S. following the introduction of new legislation (the Genius Act) and may soon see widespread use in the payment system.
  • Stablecoins are digital tokens backed by a reserve of regular U.S. dollars, designed to maintain a stable value—unlike, for example, bitcoin.
  • All issued stablecoins must be fully backed by safe and liquid dollar reserves, making them digital reflections of existing money and not directly increasing the money supply.
  • Stablecoins are seen as an alternative to central banks’ planned digital currencies (CBDCs), especially since the private sector is now driving the development rather than the Fed.
  • Increased use of stablecoins could strengthen the global position of the dollar and boost demand for U.S. Treasury bills.
  • There are risks associated with stablecoins, such as credit risks in the event of issuer bankruptcy and potential financial stability risks if growth is rapid.

Learn more about Javeus' thoughts on the matter (research.sebgroup.com)

Up