Stablecoins Drive Potential Revolution in U.S. Monetary Finance
The financial landscape may undergo a significant change with the rise of "narrow banking" built on stablecoins, which could reshape global finance, economic development, and geopolitics. Key points include:
- Narrow banking separates payment functions from credit creation.
- Stablecoins are decentralized digital currencies pegged to fiat currencies.
- Annual stablecoin transaction volumes surpassed $35 trillion, doubling previous figures.
- This growth is fueled by real-world applications, particularly in countries with unstable currencies.
Recent U.S. legislative efforts aim to institutionalize stablecoins, emphasizing one-for-one backing with high-quality liquid assets (HQLA) and regular audits. This aligns with narrow banking principles, although access to the Federal Reserve remains restricted for stablecoin issuers.
Political support for these changes stems from ongoing criticism of traditional banks and national interests in maintaining competitive payment systems against rivals like China. The evolving financial structure in the U.S. favors a transition to stablecoin-based narrow banking, potentially leading to significant economic implications.
The shift could create both winners and losers within the U.S. and globally, altering existing financial dynamics.