Systemic stablecoin and the brave new world of digital money

Abstract

New forms of money invite informed speculation regarding future possibilities. In this extended commentary, we explore five issue-areas that the growth of cryptocurrency and, more particularly, stablecoin have evoked. This new form of digital money has the potential to change the form and functioning of payments technologies and thus alter not just how something is paid for but what can be paid for. Moreover, as the now shelved plans for Facebook/Meta’s Libra/Diem indicate, there is scope for a major corporation or coalition of corporations to issue their own stablecoin and this greatly increases the likelihood of a ‘systemic’ stablecoin. This, in turn, could change where power resides and who exercises it in banking, finance and society. Concern with power leads to issues regarding the nature of change and thus to concern with possible financial, economic and social disruptions ranging across the nature of trust, bank business models, the effectiveness of central bank policy and security of payments systems. Given these issues, cryptocurrency and stablecoin have become a growing concern for regulators and this concern extends to the case for a retail central bank digital currency (CBDC). Finally, a new form of money invites discussion of its implications for the nature of money and this leads to matters of philosophical or social theory interest.