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Warwick Powell's avatar

It’s an important discussion to be having. That said, the question is: in what ways are stablecoins of use, to whom and under what circumstances? As fiat currency derivatives, they do not add to aggregate money stock but provide a different mechanism for accounting for the exchange of value. The promise is faster, cheaper, more secure, more private. On each front, the claims cannot be accepted without qualification. Other technologies deliver fast and cheap too, with similar or better security properties. As for privacy, stablecoins have been a favourite for illicit uses but the KYC/AML regulatory noose will tighten. The risks include de-pegging and actually high costs. Add to the risks the under-provisioning of “dollar for dollar” security and the risk is that stablecoin holders cannot redeem for want of fiat liquidity on the part of the issuer.

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Max D's avatar

Dollar-backed stablecoins are a geopolitical extension of U.S. financial power, exploiting gaps in global digital currency infrastructure to entrench the dollar’s role. Yet they cannot solve America’s own payments inefficiencies or replace a genuine digital USD. China, with the digital RMB and the prospect of a robust RMB bond market, holds the most credible strategy to challenge dollar supremacy in international finance—by offering partners a stable, low-cost alternative with deeper economic integration.

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