Not a single stablecoin monitored by the Bank for International Settlements has successfully maintained its currency peg, raising critical questions about their effectiveness in the real economy.
A recent paper prepared by senior economists at the central bankers’ bank reviews the evolution of the stablecoin market over the past decade and assesses whether stablecoins have truly lived up to their name in terms of stability.
The study analyzed data on 68 stablecoins and found that none have consistently maintained parity with their pegged currencies. The paper comments, “This is irrespective of their size or type of backing.” Furthermore, it asserts, “Currently, there is no guarantee that stablecoin issuers could redeem users’ stablecoins in full and on demand. Consequently, we conclude that the stablecoins in circulation today do not fulfill the essential criteria for being a safe store of value and a reliable means of payment in the real economy.”
Additionally, the paper points out significant data gaps related to blockchain transactions and user numbers, which hinder efforts to create effective policies and safeguards for regulating the market.
The report warns, “An important consequence of this data gap is that the true risks of stablecoins may be underestimated. This not only impedes authorities’ ability to make informed decisions and develop evidence-based policies but also complicates potential interventions during scenarios such as runs or other loss-of-confidence events that could negatively impact consumers.”