‘Primitive’ stablecoin lacks mechanisms that maintain fiat stability: BIS

Stablecoins lack crucial mechanisms that guarantee money market stability in fiat, and an operational model that gave regulatory control to a central bank would be superior to private stablecoin, a study released by the Bank for International Settlements (BIS) found.

The authors used a “money view” of stablecoin and an analogy with onshore and offshore USD settlement to probe the weaknesses of stablecoin settlement mechanisms. 

Per the study:

“In both Eurodollar and FX markets, when private bank credit reaches the limits of its elasticity [that is, loses the ability to maintain par], central bank credit steps in, with the ultimate goal of protecting par in global dollar… Read more on Cointelegraph

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