Berkeley Professor Takes Dim View of Stablecoins in New Critique

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Steve Anderrson
Steve Anderson is an Australian crypto enthusiast. He is a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralisation, understanding the true potential of the blockchain. Join the official channel of thecoinrepublic, For the latest news updates: https://t.me/thecoinrepublic

The cryptocurrency industry continues to see more and more stablecoins hit the market, some of which come directly from or via traditional finance institutions.

This week saw regulators green light both the Winklevoss twins’ first stable coin asset, the Gemini dollar, along with a similar offering from Paxos.

Prior to that, a Liechtenstein bank announced its intention to issue a Swiss franc-backed stable coin in August.

Taking the emerging market sector, which includes well-known assets such as Tether (USDT), to a task, Professor of Economics Barry Eichengreen argues that stablecoins are not automatically “viable” just because they are pegged to reserves of, for example, fiat currency.

Eichengreen writes that “conventional cryptocurrencies, such as Bitcoin, trade at wildly fluctuating prices, which means that their purchasing power – their command over goods and services – is highly unstable,” adding:

“Stable coins purport to solve these problems. Because their value is stable in terms of dollars or their equivalent, they are attractive as units of account and stores of value. They are not mere vehicles for financial speculation. But this doesn’t mean that they are viable.”

Here  Eichengreen concludes:

“In other words, it is not obvious that the model will scale, or that governments will let it.”

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