What are "stablecoins" - And how could they change the world?

"Stablecoin" is a nickname for any cryptocurrency with its price pegged to that of some other - generally stable - asset(s). Most are redeemable in (backed by) that asset, which can be another cryptocurrency, a fiat currency, or a commodity like gold or silver.

Since the price of those other assets is generally fairly stable, this aspect of stablecoins reduces certain risks of ownership, while simultaneously providing all the advantages of a cryptocurrency (speed, cost, privacy, decentralization, etc). Some stablecoins available (or soon available) are Tether (USDT), Libra (FaceBook), and JPM Coin (JP Morgan).

Threat announced!

Last week, the G7 (world's top 7 economies) announced that stablecoins may soon collapse the world's monetary system. Clearly there's something about this concept that threatens the mighty international baking cartels!

Today, the G20 (world's top 20 economies) announced that stablecoins threaten the world's financial stability. They agreed to attempt to improve existing international banking channels, and consult the International Monetary Fund (IMF) for help against this threat. They claim stablecoins should not be created or used until their concerns are addressed:

• what could happen if stablecoins backed by a huge customer base become widely used globally?
• how can we prevent illegal use of stablecoins?
• is this creation of a new world currency?

Notice that the G20's stated concerns could just be their general concerns about cryptocurrency in general. Nothing they said betrays the real source of their fear about cryptos that are stable (that is, cryptos that are backed by something).

They are, when it comes right down to it, afraid of Gresham's Law. And they should be, because bad money DOES always drive out good. Currencies that have all the pluses of cryptos, but also all the benefits of being pegged to/backed by a stable asset, indeed could eventually drain all value out of the legacy banking system. They see it coming, and they're trying to get out ahead of the problem. (Or this is all by design, and they WANT the system to come down, so they can provide a new system they also control.)

The right cryptocurrency, redeemable by some stable asset(s), may indeed pierce the armour of the international banking order and bring down this current paradigm - whether or not that is by design.

DRutter