Reuters Econ World Stablecoins
Jul 2, 2025
In this enlightening discussion, Hyun Song Shin, economic advisor and head of the Monetary and Economic Department at the Bank for International Settlements, explores why central bankers remain skeptical about stablecoins. He highlights potential risks and their limitations as substitutes for money. The conversation touches on the role of stablecoins in inflationary economies like Turkey, emphasizing their use for international transfers and as protection against inflation. Additionally, Shin addresses the broader implications for monetary policy and the challenges they pose to financial stability.
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Stablecoins as Dollar-Pegged Crypto
- Stablecoins are usually pegged 1:1 to fiat currencies, mainly the US dollar, by holding equivalent reserves like cash or government bonds.
- This creates an alternative payment system circulating on public blockchains, making regulation and enforcement challenging especially in emerging markets.
Stablecoins Lack Credit Function
- Stablecoins always carry an issuer-specific exchange rate, making them more like financial assets than money.
- They lack banks' credit function and overdraft facilities, limiting their usefulness for large value commercial payments.
Stablecoins in Turkey as Inflation Hedge
- Igor Barakovsky, living in Turkey, buys stablecoins to hedge against soaring local inflation and to send money abroad cheaply.
- He finds stablecoins easier, faster, and less costly than traditional banking systems for international transfers.