- Unveiling the concerns and challenges stablecoins are causing for central banks, using insights from Bank of Korea Governor, Rhee Chang-yong.
- Discussing the potential transformation in the role of central bank money due to stablecoin proliferation.
- Delving into the impact of stablecoins on monetary policies using real-world examples.
In the rapidly advancing world of digital currencies, the escalating prominence of potent stablecoins is driving central banks worldwide to chart uncharted financial landscapes. Bank of Korea Governor Rhee Chang-yong has been prominent in expressing concern over the potentially destabilising influence of growing stablecoin usage, reflecting broader sentiments among global central bankers.
A detailed analysis of this evolving discourse uncovers deep-rooted apprehensions over the potential chaos that popular stablecoins, names like USDT and USDC included, could instigate within the financial ecosystem. The very essence of stablecoins is designed to reduce price volatility, achieved by anchoring them to a stable asset or a basket of assets. However, Rhee, among others, has voiced anxieties about their inherent instability. Such concerns are not baseless - despite their moniker, stablecoins can encounter significant value swings, leading to market upheavals. A well-documented instance occurred during the 2018 "Black Thursday" debacle, when the price of an algorithmic stablecoin, DAI, experienced a sharp escalation, exerting immense strain on its peg to the US dollar.
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