Researchers at the New York branch of the US Federal Reserve Bank believe that stablecoins are not the future of the payment system.
Fed New Yorkfour researchers of February 7 In the article published on reasons why stablecoins have no future for payments revealed. Researchers in the article distributed ledger technology (DTL) in the case of integration into the traditional financial system stablecoins will not be the best way to transfer money argues.
According to the researchers, stablecoins that are tied to reliable currencies like the dollar to stay stable are unnecessarily tied together. In the article, researchers say that the use of stablecoins can lead to a shortage of safe and liquid assets;
Linking safe and liquid assets to a stablecoin arrangement means that stablecoins are not suitable for other uses, such as helping banks meet regulatory requirements to maintain adequate liquidity.
Seeing stablecoins that do not tie up liquidity, such as those based on algorithms, as risky and less tradable, the researchers cited an article that claimed that stablecoins could be compared to private notes issued during the “free banking” era in the US in the mid-18th century.
Adding that these private banknotes in the past have shown that stablecoins may experience similar problems, the researchers added;
Private notes were not tradable, and people using them had to consider whether to accept any special notes at face value.
While the paper highlights the benefits of keeping banks centralized in the payment system, the researchers raise the question of why the central bank would use stablecoins if it could issue tokenized deposits.
The rationale behind tokenized deposits is simple, although the practical details need to be worked out. Bank depositors will be able to convert and extract their deposits into digital assets that can circulate on a DLT platform. These tokenized deposits represent a claim on the depositor’s bank just like a regular deposit does.
It was also stated in the article that customers can exchange these deposits for goods or services using existing well-functioning payment infrastructures.
Article, professor of economics at the University of California Rod Garrattfrom the New York Fed’s research and statistics group Michael Lee and Anthony Martinfrom the law group Joseph Torregrossa prepared by.