Your article “Banks and fintechs join ‘stablecoin gold rush’” (FT.com, March 10) misses two key points regarding stablecoins.
Stablecoins don’t just facilitate payments in emerging markets with poor infrastructure. According to Stripe, blockchain-based stablecoins “make money movement cheaper and faster”, and they are “globally available, open-access and programmable”.
Moreover, stablecoins issued under European e-money regulations are fungible with cash, as evidenced, for example, by the fact that the ECB accounts for e-money in the same way as demand deposits. E-money is safeguarded under stringent, standard rules; it’s not the brand that tells you what the credit risk is, it’s the licence.
Like Napster for music sharing, the first generation of stablecoins were initially improvised to serve a small niche of early adopters — cryptocurrency speculators. They are ad hoc, inaccessible, mostly illegal, and unsuitable for mainstream use. The next generation of stablecoins are fungible, accessible, compliant and integrated with the existing financial infrastructure. Like with other onchain assets — transactions recorded on a blockchain — their programmability and open-access enables “open banking on steroids”. The next generation of stablecoins will unleash a new wave of onchain fintech apps, including peer-to-peer lending and trading of digital assets, which are much faster, simpler and cheaper than most existing fintech alternatives, in emerging or developed markets.
For incumbent banks and fintechs, stablecoins do not herald a gold rush because their infrastructure and business models are built on old paradigms. The new onchain entrants will outcompete them, and the incumbents will eventually fade away.
Sveinn Valfells
Co-founder & Chair, Monerium, Reykjavik, Iceland
