The latest IMF article: The rise of stable currency, the weak currency will face a huge threat

One of the main reasons why stable coins can get a rapid rise is that people think that stable currency is a reliable means of payment. In addition, there are many other potential advantages to stable coins, such as low cost, global coverage, and high processing efficiency. In addition, the stable currency can be seamlessly used for payment based on blockchain assets and embedded into digital applications through its open architecture without the need for a traditional banking trading system.

Digital payments bring huge benefits to consumers and society, such as a significant increase in payment efficiency, enhanced market competition, financial inclusion and innovation. But at the same time, this new form of payment also brings a range of risks, such as financial stability and integrity issues, monetary policy effectiveness and competition standards.

01 popularization of stable currency

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When a new form of currency emerges in the market, its popularity depends on whether it can be a powerful means of value storage and payment.

The new form of "currency" such as stable currency is very different from cash or bank deposits because there is no "guarantee" for stable currency. Although some stable coins can make claims to the issuer after problems occur, some stable currency issuers also provide corresponding face value redemption guarantees, but most of the current stable coins lack government endorsement.

One of the main reasons why stable coins can get a rapid rise is that people think that stable currency is a reliable means of payment. In addition, there are many other potential advantages to stable coins, such as low cost, global coverage, and high processing efficiency. In addition, the stable currency can be seamlessly used for payment based on blockchain assets and embedded into digital applications through its open architecture without the need for a traditional banking trading system.

On the other hand, one of the most attractive features of Stabilizing Coins is to make payment transactions as easy as communicating on social media. With the support of stable currency, payment is not just a transfer behavior, but a basic social experience that connects each other. Stabilizing coins allows people to better integrate into digital life, so large technology companies with large global user bases can use the existing network of funds to make this new payment method spread quickly.

02 stable currency risk

There are also many risks in stabilizing coins. Policy makers therefore need to create an environment that maximizes profits and minimizes risks. In addition, policy makers in different countries need to innovate and collaborate with each other to cope with the stability of currency risks.

First, when banks “lost” stable currency issuer deposits, they lose their “middleman” status in the stable currency market. However, banks will certainly take action, such as raising their competitiveness through higher interest rates. In addition, stable currency issuers can also withdraw funds into the traditional banking system, or engage in loan business by increasing their own deposits. In short, the role of banks in the stable currency market is unlikely to disappear.

Second, there may be new monopolies. In the field of stable currencies, technology giants may monopolize the market. Thanks to its vast network, large companies block competitors from accessing information such as transaction data. If you want to solve this problem, you need to set new standards in terms of data protection, portability, control and ownership, and interoperability.

Third, the weak currency will face a huge threat. If there is a strong stable currency in a country with a poor economy or a high inflation rate, then the local currency is likely to be abandoned, and the local may form a new form of “dollarization”, which in turn undermines its monetary policy. , financial development and economic growth. More seriously, assuming that the government is forced to adjust monetary and fiscal policies, they need to decide whether to ban the stable currency anchored with foreign currencies.

Fourth, stable currency will bring more illegal activities. Stabilizing currency issuers must implement international standards, and regulators need to demonstrate how to prevent stable currency networks from being used for money laundering and terrorist financing. Regulators, on the other hand, need to adapt to the increasingly stable and increasingly diverse range of stable currency value chains.

Fifth, the income from the "coinage tax" will be affected. The central bank can obtain profits from the difference between the currency denomination and the manufacturing cost. This is the so-called “coinage tax”. However, the stable currency issuer will earn profits by supporting the stable currency hard currency and get a return. One way to solve this problem is to promote competition and stimulate stable currency issuers to pay interest.

Sixth, policy makers must strengthen consumer protection and maintain financial stability. Policy makers need to protect the safety of their clients' funds while ensuring that funds are not affected by bank runs. To achieve this goal, the law needs to clarify the type of financial instruments represented by the stable currency, while also requiring the stable issuer to maintain sufficient liquidity and capital at all times.

Stabilizing coins has both challenges and potential. Therefore, policy makers need to develop a far-sighted regulatory system that can meet challenges.

Compile: White Night

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