The evolution of stablecoins

Cross border payments generate over $23.5trillion of transactions p.a., so the potential for stablecoins as an alternative mechanism for making payments is huge. Little wonder we are seeing more and more institutional interest in stablecoins, with a recent example being three of Japan’s’ biggest banks using stablecoins alongside SWIFT. However, there is a lack of regulatory clarity around digital money in many countries and in some countries, such as the UK, regulated companies are not even able to issue stablecoins, leaving the market open for overseas unregulated operators. Yet Andrew Bailey, Governor at the Bank of England, is cognisant for the need to embrace technology: “harnessing digital technology to improve strikes me as having real potential, say in areas like solving late payment for firms by enabling automatic release of funds when goods are delivered”. Therefore, if we were to look at the ideal characteristics for a stablecoin, it would arguably have the following feature…