Move Over Stablecoin. A New Token Is Coming
Bank deposits always covert to currency at face value. Or that’s what people believe. So why not put these liabilities on the blockchain?
It’s the next big thing.
Photographer: Christopher Pike/BloombergThe world of digital cash is divided into two camps. The traditionalists want a public authority to remain in charge of providing a safe medium of exchange for people to settle claims against one another. Or else, they say, private money could become as unreliable as in the pre-US-Civil-War era of wildcat banking, when notes issued by a lender in Tennessee would be discounted by 20% in Philadelphia.
On the other hand, the experimentalists believe that excitement around central bank digital currencies, or CBDCs, is a fad — a bit like the 1980s “parachute pants.” As long as a nation has established a unit of account, it’s fine to step aside and allow the nonstate sector to come in with its own stablecoins, electronic representations of value pegged to the dollar, euro, yen, or the pound. Who needs the Federal Reserve to issue a digital dollar to compete with China’s e-CNY when there’s already Tether?