Sorry.
My mistake. I wanted to link to FT Alphaville's editor and somehow one of those promoted links at the top of the ZeroHedge [buy gold] home page showed up.
Regret the error.
Let's try this again. From FT Alphaville:
A G7 stablecoin report that tells it how it is
Overnight the G7 investigation into the impact of global stablecoins was published, and by and large it’s a very sensible account of the challenges and opportunities in the sector. (Rightly dwelling a lot on the challenges.)....MORE
And, of course — because why wouldn’t it — the report also sets us up with a new acronym for good measure. They ain’t stablecoins no more. They’re GSCs.
The full investigation is worth a read, but for those who can’t be bothered, here are the most important points made in reverse order.
Coming in at number five is the fact that stabelcoins are a poor man’s dollarisation system, which comes with its own drawbacks — not least the end of currency sovereignty and seigniorage revenue — and more if managed by a private sector system rather than a nation state. As the report notes, with our emphasis:
This would also lead to a reduction in seigniorage revenue for the central bank (and the associated fiscal revenue of the governments). These effects would be similar to those already seen in countries where cash usage has declined due to dollarisation. However, currency substitution to GSCs may have different implications than to foreign fiat currency (classic dollarisation), given the inability to hold sovereign-to-sovereign discussions on the public policy implications of such substitution. Additionally, because domestic savers will be able to switch between domestic currency deposits and GSC holdings, the return on a GSC may affect the amount of domestic currency deposits and thus deposit and loan interest rates in the domestic currency financial system, further diluting the effectiveness of the interest rate channel of monetary policy. This is similar to the effect already induced by dollarisation in some countries, but may materialise for other countries not currently subject to dollarisation.Coming in at number four is the pressure such systems may put on the world’s supply of safe assets (HQLA) and therefore domestic bank liquidity and state treasuries. From the report, again with our emphasis:...
