With the recent collapse in U.S. interest rates, the stablecoin industry is in for a rough ride. Some stablecoin issuers may have to rejig their business models over the next few months. The weakest of them may have to close shop.
If you’re still not sure what stablecoins are, think of them as a new-fangled version of the classic banknote. Did you know that in Northern Ireland, banks are still allowed to issue their own private banknotes? These notes are 100 percent redeemable for banknotes issued by the UK’s central bank, the Bank of England. The Irish love their private notes, and treat them exactly like state-issued cash. They are widely accepted at shops all over Northern Ireland.
The obvious difference is that whereas a Northern Irish banknote is a paper replica of government money, a stablecoin is a digital replica issued on a blockchain. But, apart from that, they’re quite similar. To begin with, stablecoins and banknotes are both bearer instruments. They circulate from hand to hand, or wallet to wallet, without needing a centralized authority to manipulate accounting entries.