BIS/G7/IMF: Investigating the impact of global stablecoins

Technological innovation is transforming the provision of financial services and products. Payment services, in particular, have seen significant change in recent years through the introduction of new payment methods, platforms and interfaces. In fact, an increasing number of countries have payment systems that provide inexpensive and near instant domestic payments. However, challenges in current payment services remain. Above all, cross-border payments remain slow, expensive and opaque, especially for retail payments such as remittances. Moreover, there are 1.7 billion people globally who are unbanked or underserved with respect to financial services.

Given the innovative potential of the underlying technology, cryptoassets were originally envisioned to address some of these challenges. However, to date, they have suffered from a number of limitations, not least severe price volatility. Thus, cryptoassets have served as a highly speculative asset class for certain investors and those engaged in illicit activities, rather than as a means to make payments.

Stablecoins have many of the features of cryptoassets but seek to stabilise the price of the “coin” by linking its value to that of a pool of assets. Therefore, stablecoins might be more capable of serving as a means of payment and store of value, and they could potentially contribute to the development of global payment arrangements that are faster, cheaper and more inclusive than present arrangements. That said, stablecoins are just one of many initiatives that seek to address existing challenges in the payment system and, being a nascent technology, they are largely untested.

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