The Future of Payments Is Not Stablecoins

Rodney Garratt, Michael Lee, Antoine Martin and Joseph Torregrossa

No 20220207, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: Stablecoins, which we define as digital assets used as a medium of exchange that are purported to be backed by assets held specifically for that purpose, have grown considerably in the last two years. They rose from a market capitalization of $5.7 billion on December 1, 2019, to $155.6 billion on January 21, 2022. Moreover, a market that was once dominated by a single stablecoin—Tether (USDT)—now boasts five stablecoins with valuations over $1 billion (as of January 21, 2022; data about the supply of stablecoins can be found here). Analysts have started to pay increased attention to the stablecoin market, and the President’s Working Group (PWG) on Financial Markets released a report on stablecoins on November 1, 2021. In this post, we explain why we believe stablecoins are unlikely to be the future of payments.

Keywords: digital currencies; stablecoins (search for similar items in EconPapers)
JEL-codes: E42 E5 G21 (search for similar items in EconPapers)
Date: 2022-02-07
New Economics Papers: this item is included in nep-cwa, nep-mac, nep-mon and nep-pay
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