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Macro Musings with David Beckworth
Larry White on Stablecoins, Money Market Funds, and the History of Free Banking
Aug 2, 2021
Larry White, a professor of economics at George Mason University, discusses stablecoins, the history of free banking, and money market funds reform. They explore concerns and potential of stablecoins, dangers and concerns surrounding them, and the relationship between stablecoins and money market mutual funds. They also discuss proposals and debates for reforming money market funds and addressing risk in them.
52:42
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Quick takeaways
- Stablecoins have not yet reached a scale that poses systemic risks to the financial system, with limited use by ordinary consumers for everyday retail transactions.
- Stablecoins differ from money market funds in terms of their underlying structure and risk profile, making reforms like floating net asset values or contractual share reductions less applicable and potentially detrimental.
Deep dives
Stable coins are an alternative payment rail in the crypto space
Stable coins are dollar-denominated digital assets that allow crypto traders to seamlessly trade cryptocurrencies without the hassle of using traditional banking systems. These tokens are mainly used by traders who want to avoid delays and regulatory processes involved in wire transfers. The total market size of stable coins is around $110 billion, with daily transactions ranging from $10 to $20 billion. While concerns have been raised about stable coins competing with traditional banking systems, there is currently limited use by ordinary consumers for everyday retail transactions.
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Discover
highlights
Listen to the best highlights from the podcasts you love and dive into the full episode