Stablecoins: Types and Applications
8 Pages Posted: 3 Apr 2020
Date Written: March 12, 2020
Stablecoins are digital tokens that aim at “stabilising major currencies directly in the market for cryptoassets”. Stablecoins are built on a set of stabilization tools that classify them as tokenized funds, off-chain collateralized, on-chain collateralized and algorithmic. The paper provides a detailed overview of the different stabilization mechanisms supported by examples of international market applications. In addition, the paper distinguishes between private-issued and state-issued stablecoins and discusses current developments in Switzerland and China. Finally, the paper concludes with a discussion on the major advantages and challenges related to the implementation of stablecoins. The paper recognizes the advantages of stablecoins for the underbanked people and cross-border payments as well as acknowledges the challenges related to the establishment of an internationally-coordinated legal framework and enforcement on stablecoins.
Keywords: blockchain, stablecoins, digital currencies, digital assets
JEL Classification: O54, P48
Suggested Citation: Suggested Citation