Stablecoins, Historical Precedent, Technological Novelty and Limited Reality

Stablecoins are widely portrayed as a transformative financial innovation. This article argues that, despite their technological novelty, they are best understood as a modern variant of earlier private monetary instruments. Drawing on an examination of their technological features, it shows that stablecoins are unlikely to become widely used in everyday transactions in advanced economies. Their main use cases remain within the crypto ecosystem, cross-border transfers, and activities outside official financial channels. From a financial stability perspective, the key issue is not the underlying blockchain technology but the balance sheet structure of issuers, which face an inherent trade-off between safety and return. Recent regulatory initiatives, particularly in the United States, also reflect broader objectives, including support for demand for public debt. The appropriate policy response is therefore to recognise the limited role of stablecoins while ensuring transparency and containing potential spillovers to the wider financial system.