Are Stablecoins a Threat to the US Dollar

Stablecoins are undeniably one of the most vital loadbearing pillars of the cryptocurrency economy. Stablecoins make it possible for us to use a wide variety of exchanges, while still allowing us to park our crypto gains in a relatively stable store of value. The incredible value of stablecoins however, has led them to become one of the most scrutinized forms of cryptocurrency. In this piece, we will be taking a look at whether stablecoins are either threatening or benefiting fiat currencies like the US dollar.

Why Governments are Concerned With Stablecoins

The US Federal Reserve and Treasury have been concerned with stablecoins since their inception, but are these concerns justified? Unlike other types of cryptocurrencies, the majority of stablecoins are pegged to real-world assets. More often than not, the real-world assets that stablecoins are pegged to are fiat currencies.

Governments claim that stablecoin holders may be putting their faith in a currency that can’t actually be redeemed for its pegged value. Although this might be a valid concern in certain cases, there has so far been no evidence that any of these claims are justified. Most likely, governments dislike the idea of stablecoins because they interfere with emerging Central Bank Digital Currencies.

Central Bank Digital Currencies

Central Bank digital Currencies, or CBDCs are fully centralized digital assets created by governments, as an alternative to their own fiat currencies. CBDCs behave like fiat-backed stablecoins in many ways, however they are far more susceptible to government interference. Governments can control every aspect of their respective CBDCs on a whim, increasing or decreasing the supply instantaneously. Governments can of course print more fiat currency as well, but in the case of fiat, there is a delay from when it is printed to when it enters and exits the economy. Furthermore, fiat currencies are typically held by individuals in banks. CBDCs on the other hand, are controlled directly by the central bank, meaning they are not actually under the control of whoever is holding them in their possession.

Do Stablecoins Strengthen Fiat Currencies?

A number of top crypto executives attended a hearing yesterday to discuss the potential risks commonly associated with cryptocurrency. Stablecoins was one of the most heated points of discussion. This hearing was attended by the likes of Jeremy Allaire, Sam Bankman Fried, Brian Brooks, Charles Cascarilla, Denelle Dixon, and Alesia Jeanne Hass.

CEO of Paxos, Charles Cascarilla stated that stablecoins are not harmful to the US dollar, but rather empower the US dollar by inviting more people to participate in a dollar-based economic system. As Charles Cascarilla stated: “I actually don’t think that it’s contradictory at all. What people want is s a US dollar bank account. Everyone in the world wants to be able to have US dollars, and actually, that’s the hardest thing to get. Crypto is a tool for a lot of different things including bringing communities together, but what people want for their everyday spending is dollars. If you’re in Argentina you want dollars, if you’re somebody anywhere in the world you want to have access to dollars and that’s the hardest thing to get access to right now and that’s why tokenized dollars is so valuable because you don’t need a bank account yet you can have access to the dollar-based system, which is a very important tool for inclusion.”

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