Do stablecoins live up to their name and can they serve as a reliable means of payment and store of value? We study 68 stablecoins and show that not one of them has been able to maintain parity with its peg at all times.
Senior Economist Anneke Kosse discusses these questions based on the BIS paper "Will the real stablecoin please stand up?" She also highlights how significant data gaps regarding the users and uses of stablecoins make it difficult to ascertain the risks they pose to the smooth functioning of payment systems and financial stability.
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Stablecoins are a subcategory of cryptoassets that aim (or claim) to maintain a stable value relative to a specified peg. This paper provides an overview of the evolution of the stablecoin market over the past decade and examines whether stablecoins have stayed true to their name in terms of being "stable". We study 68 stablecoins and show that not one of them has been able to maintain parity with its peg at all times. This is irrespective of their size or type of backing. Moreover, we argue that there is currently no guarantee that stablecoin issuers could redeem users' stablecoins in full and on demand. For these reasons, we conclude that the stablecoins in circulation today do not meet the key criteria for being a safe store of value and a trustworthy means of payment in the real economy. This paper also highlights some significant data gaps. Without further data on the uses and users of stablecoins, it is difficult to ascertain the risks of stablecoins to the smooth functioning of payment systems and financial stability more broadly.
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BIS
© BIS - Bank for International Settlements
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