The american government is about to wage war on a new, burgeoning cryptocurrency class called stablecoins.
While bitcoin and similar cryptos grab the headlines, it is the stablecoins that governments and central banks really fear and will fight fiercely.
Unlike bitcoin and its sidekicks, which fluctuate like a roller coaster, stablecoins are tied to real assets, such as the dollar or gold. This means that they can be easily used for daily business transactions as well as for long term contracts. No one in their right mind would take out a bitcoin-denominated mortgage, where you could end up owing ten times the face price of your house.
This new class of crypto exploded from a total value of $ 28 billion at the start of the year to $ 110 billion in July. Its use in commercial relations is also increasing. No wonder: Done well, stablecoins are the equivalent of cash.
It can be seen how stablecoins will pose a deadly threat to today’s payment processing systems, which are complex, cumbersome and expensive. Thanks to blockchains, stablecoins eliminate the middleman. For example, credit card transactions typically cost merchants 2-3% fees. With stable coins, these fees will disappear.
Stablecoins will also make cross-border trading and remittances much easier, while eliminating the usual fees.
The ultimate savings for consumers and businesses could run into literally hundreds of billions, if not billions of dollars per year.
This would free up huge sums of capital to finance new businesses and significantly increase productive investment in existing businesses. As a result, the standard of living will increase significantly.
The apparent goal of Treasury Secretary Janet Yellen’s July meeting with the President’s Financial Markets Task Force seemed benign and appropriate. To quote Yellen, “Bringing the regulators together will allow us to assess the potential benefits of stablecoins while mitigating the risks they may pose to users, the markets or the financial system.”
Some common sense regulations are in order, notably to ensure that a stablecoin issuer actually has the assets necessary to safeguard its coins, just as investors are assured that a money market fund actually has the assets it needs. he claims to have.
But don’t be fooled by the real agenda here. Regulators are realizing that stablecoins threaten not only existing payment systems but also, and more fundamentally, the very monopoly of governments on issuing currency. Governments do not want any challenge to this monopoly.
Here, the fireworks have only just begun.