IMF’s Latest Fintech Report Is All About Stablecoins
IMF’s ‘Fintech Notes’, essentially a series of IMF staff papers outlining the current state of the financial technology sector, released a new report on September 19th, this time focusing on stablecoins, or simply digital currencies that are pegged to traditional government-backed currencies.
The publication entitled “Digital Currencies: The Rise of Stablecoins”, addresses the latest ‘hype’ in the crypto scene, coming not from Bitcoin’s lair, but actually from governments and hi-tech giants such as Facebook who are eager to develop and deploy a cryptocurrency that could be served as a digital representation fgor an already established physical monetary system subject to fiat currencies such as the USD, Euro, or the Chinese Yuan.
Now, before we dive in, I want to take a clear look at that again. Not just any monetary supervisor, but the International Monetary Fund is talking crypto, beyond Bitcoin, just a couple years after cryptos were labeled under the ‘Ponzi-scheme’ catalog by gov-level bodies, banks, and international financial ‘experts’. Isn’t that pleasing?
According to IMF, while traditional cryptocurrencies are offering a store of value and can be used as exchange mediums, stablecoins are particularly taking off this period for a variety of good reasons.
Stablecoins are attractive as a means of payment. They offer lower transaction fees and transaction times, compared both to fiat currencies, and legacy cryptos such as Bitcoin. At the same time, being basically blockchain-powered crypto, a stablecoin offers global reach and can be integrated into mobile, web, and/or decentralized applications due to the nature of a DLT’s architecture.
From a certain point of view, one could say that stablecoins are igniting the first step for global cryptocurrency adoption, as the main factors that deem cryptocurrencies of the likes of Bitcoin ‘considerable’ but not a hundred percent legit, is their price volatility.
Stablecoins managed to ‘fork’ the traditional crypto market, and create a legitimate cryptocurrency market, that consists of digital assets representing physical assets, fiat currencies, or bonds that tend to have a fixed or low-affection price.
IMF says “a battle is raging for your wallet. New entrants want to occupy the space once used by paper bills or your debit card”, and it couldn’t be further from the truth, especially when you don’t just see unknown private blockchain firms and ICOs trying to create the next big thing in the crypto industry as recorded in the past, but governments, and hi-tech monopoly players rushing to create their own stable cryptocurrencies.
The report outlines some of the risks attached to stablecoins, providing a series of tips, or ‘observations to consider’ as cited by IMF, to help with the global adoption of digital currencies in the smoothest possible way.
In ‘uzi’ speed, some of the indicated risks include: banks losing their power, tech giants creating new monopolies, weak national currencies will be extremely volatile to major stablecoins’ behavior, and potential financing of illegal activities through stablecoins are all possible threats that should be considered by policymakers, who IMF suggests should innovate and collaborate across countries, but also across functions in order to be ahead of their game.
Wanna learn more about stablecoins? Did you know that China and Germany are among the first countries to deploy their own national cryptocurrencies? Learn what international regulators believe about Facebook’s Libra.