Toward a transparent and stable cryptocurrency

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Stablecoins are moving from the fringes of crypto to the center of finance. The US Genius Act requires issuers to hold reserves one-for-one in cash, deposits, and short-term…

Stablecoins are moving from the fringes of crypto to the center of finance.

The US Genius Act requires issuers to hold reserves one-for-one in cash, deposits, and short-term Treasuries. That makes a digital dollar redeemable. But it does not answer a deeper question: what makes money stable?

For a stablecoin, the answer is liquidity. The closer the reserves are to cash, the more credible the promise of redemption. But a token can remain redeemable for exactly one dollar while that dollar loses purchasing power. Redemption and value are different things.

Value ultimately rests on the sovereign behind the dollar. A Treasury bill is a claim on the US government: its power to tax, to borrow, and to honor its obligations. As stablecoins grow, so will their appetite for those claims. Issuers are already significant buyers.

مطلع المقال، مقتطف من Asia Times. لقراءة المقال كاملًا، افتحه على موقع الناشر.