Nationalizing Stablecoins Won’t Improve Financial Access

Nationalizing Stablecoins Won’t Improve Financial Access

(Sonny Ross)

If you don’t have an opinion on stablecoins already, you might have to formulate one soon. Stablecoins – cryptographic tokens that aim to match the performance of sovereign currencies like the U.S. dollar – may well be the next battleground in the rapidly escalating war between the public blockchain industry and nation-states.

Bitcoin is a payments system and a set of monetary opinions, all bundled together. Many bitcoiners consider -the-currency to have very desirable monetary properties, but it’s undeniable that the absolutely rigid supply schedule is one cause of its legendary volatility.

However, transacting with Bitcoin is powerful: It’s a digitally native cash instrument, meaning that transactions are final and they settle regardless of the identities of the counterparties. Transactions are reasonably (if imperfectly) private, and they do not discriminate. Anyone is free to use the system, regardless of what the state or an internet oligopoly thinks of them. Improving on physical cash, Bitcoin transactions work at a distance, as they can be broadcasted through virtually any communications medium. Yes, Bitcoin works via carrier pigeon.

The catch? You have to use bitcoin to use Bitcoin. That is, you can’t really use the settlement system without gaining at least temporary exposure to bitcoin, the currency (or asset or commodity, depending on how you want to categorize it).

It’s therefore no surprise that, for about as long as Bitcoin has existed, builders have dreamt of settling sovereign currencies on its blockchain. Stablecoins disentangle the monetary prescriptions of digital assets like bitcoin from the settlement networks on which they rely. Early experiments included Nubits and BitUSD. Even Mastercoin, the first initial coin offering (white paper published in January 2012), contained designs for a stablecoin that were later scrapped. The first successful stablecoin was , which owed its initial growth spurt to Bitfinex’s unstable connections to the bank system. Using tether, traders could denominate their liquidity in a crypto-native format, staying on blockchain rails even when de-risking their positions, without having to exit to the fiat system entirely. From these rather prosaic origins, Tether (the company behind the stablecoin) has grown into a behemoth, with dollar assets totaling more than $20 billion today.

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