IMF Insights: How Stablecoins and Other Financial Innovations May Reshape the Global Economy

By: Peter Ort, The Quinnipiac University Global Economics Research Team

Photo by: Jakub Źerdzicki on Unsplash

 A recent IMF article on How Stablecoins and Other Financial Innovations May Reshape the Global Economy presents potential uses of new financial technology, such as the use of stablecoins. On a broader note, the article also examines how humans on a national or even global scale can be assisted in making transactions faster, more efficient, and ultimately more liquid.

Stablecoins, as defined by the IMF, are a digital asset backed by a currency or government bond. For countries with high inflation, it is easy to see why this could be a lifesaver for them because stable coins provide their citizens with “more stable and convenient means of payment and store of value than their domestic currency”.

Hélène Rey of the London Business School and Yao Zeng of the University of Pennsylvania Wharton School remind us that there are, however, also risks associated with stablecoins. Although they may thrive in a steady economy and assist in foreign exchange, any sort of market stress or failure may throw off stablecoins and potentially amplify damage already done to the economy.

This article also dabbles in governmental sponsoring of private systems that respond faster to consumer demand, further helping liquify currencies. Some countries have already begun, such as India with their Unified Payments Interface. Among all the emerging technology in the financial sector, it is important to be open to new opportunities that arise as well as providing adequate regulation to protect consumers and investors.

For further information, you can read “How Stablecoins and Other Financial Innovations May Reshape the Global Economy”