In a recent podcast, independent crypto strategist Nathaniel Whittemore opined that with the sudden growth, stablecoins might have emerged out of the crypto context and started to resemble something that looks more like a modern permissionless version of the Euro-dollar system. Noting that stablecoins might soon take over bitcoin in terms of being a safe-haven, he stated,
“Stablecoins are providing permissionless access into dollars and away from local monetary regimes. We’ve got a narrative battle over whether right now at this moment, Bitcoin is a risk asset or a safe-haven. However, there’s another question now as demand returns and markets are left – What will the world do after the complete wash of fiat currencies?”
Thus cryptocurrency is indeed an option that the world will have to consider eventually. But at the moment, stablecoins are acting as a bridge between traditional banks and completely decentralized cryptocurrencies. The fact that organizations are using stablecoins to keep their business running stands proof to it. In present times when the entire world has come to a halt, people are turning to stablecoins even though they are neither completely decentralized like crypto-assets nor completely centralized like traditional fiat currency.
“Initially, I thought stablecoins were just for traders to move money around exchanges and retain them within the crypto industry. But it’s become clear to me in more recent months that stablecoins actually have a genuine usage here, even for non-traders, just for regular people.”
However, stablecoins have never been liked by central banks. In fact, the International Monetary Fund had referred to stablecoins as a threat to the traditional banking system back in 2019. In a paper titled ‘The Rise of Digital Money‘, it had asserted that central banks would ‘face tough competition and could even be surpassed’ by the growth of stablecoins. Recently, the Financial Stability Board (FSB) outlined ten recommendations to central banks for regulating stablecoins, which also included outright prohibition.