The Financial Times of the UK: Why the Whole World Should Be Concerned About Stablecoins

null Article Author: Martin Wolf

Article Translation: Block unicorn

A few months ago, my son’s father-in-law was living in New York State. He transferred a large sum of money to his family in the UK. But the money had yet to arrive. Worse still, the source of the funds was completely untraceable. His bank contacted all intermediary banks involved, but was told that the UK receiving bank—one of the largest banks in the UK—refused to respond to any inquiries. I asked colleagues what might have happened, and they said it could be related to money laundering. Meanwhile, my father-in-law was extremely anxious. Two months later, the money suddenly appeared in his account. He knew nothing about what had transpired during that period.

This situation was very different from my previous experiences transferring money between the UK and the EU. Across the Atlantic, remittances have always been reliable and quick. This may be one reason why Americans are more willing to accept “stablecoins” as an alternative to the banking system. Daniel Davies pointed out two other reasons: one, the relatively high cost of US credit card payments (about five times higher than in Europe!); and two, the exorbitant fees for cross-border remittances. Both reflect America’s failure to effectively regulate powerful oligarchic forces.

Gillian Tett of the Financial Times raised another motivation last month for the Trump administration’s welcoming attitude toward stablecoins. U.S. Treasury Secretary Scott Bessent faced a dilemma: the U.S. needs the rest of the world to hold massive amounts of US debt at low interest rates. She noted that one solution could be to promote the widespread use of dollar-pegged stablecoins, focusing not on domestic use but on a global scale. As Tett pointed out, this would be beneficial for the U.S. government.

However, these are not legitimate reasons to welcome dollar stablecoins. As Hélène Rey of London Business School said, “For other parts of the world, including Europe, widespread adoption of dollar stablecoins for payments is equivalent to privatizing the seigniorage for global participants.” It would be yet another predatory move by the superpower. A more reasonable approach would be for the U.S. to switch to lower-cost payment systems and reduce wasteful government spending. But neither is likely to happen.

In summary, stablecoins—promoted as digital alternatives to fiat currencies (especially the US dollar)—seem to have a bright future. As Tett pointed out, “Institutions like Standard Chartered predict that by 2028, the stablecoin industry will grow from $280 billion to $2 trillion.”

The future of stablecoins may indeed be bright. But should anyone other than issuers, various criminals, and the U.S. Treasury welcome them? The answer is no.

Yes, stablecoins are much more stable than currencies like Bitcoin. But compared to cash dollars or bank deposits, their so-called “stability” is likely just a “scam.”

The International Monetary Fund (IMF), Organisation for Economic Co-operation and Development (OECD), and Bank for International Settlements (BIS) have all expressed serious concerns. Interestingly, BIS welcomes the concept of “tokenization”: they believe that “by integrating tokenized central bank reserves, commercial bank funds, and financial assets into a single platform, a unified ledger can fully realize the benefits of tokenization.”

However, BIS also worries that stablecoins cannot pass the “three key tests” of “uniqueness, resilience, and integrity.” What does this mean? Uniqueness means that all forms of a specific currency must be exchangeable at any time in an equivalent manner. This is fundamental to monetary trust. Resilience refers to the ability to facilitate smooth payments at various scales. Integrity involves the ability to curb financial crime and illegal activities. Central banks and other regulators play a core role in all this.

Current stablecoins fall far short of these requirements: they are opaque, prone to misuse by criminals, and highly uncertain in value. Last month, S&P Global downgraded Tether’s USDT (the most important US dollar stablecoin) to “Weak.” It is not a trustworthy currency. Private currencies tend to perform poorly in crises, and stablecoins are likely no exception.

If the U.S. plans to promote lightly regulated stablecoins, partly to reinforce the dollar’s dominance and finance its massive fiscal deficits, what should other countries do? The answer is to do everything possible to protect themselves. This is especially true for European countries. After all, the new U.S. national security strategy explicitly states its open hostility toward democratic Europe.

Therefore, European nations need to consider how to introduce more transparent, better regulated, and safer stablecoins in their own currencies than what the U.S. might currently launch. The Bank of England’s approach seems wise: just last month, it proposed a “draft regulatory regime for systemic sterling stablecoins,” noting that “using regulated stablecoins can enable faster, cheaper retail and wholesale payments, and enhance their functionality, both domestically and cross-border.” This seems the best starting point currently.

The Americans in power now seem very eager to adopt the motto of big tech: “move fast and break things.” When it comes to currency, this could be catastrophic. Of course, we have reason to leverage new technologies to create faster, more reliable, and more secure money and payment systems. The U.S. certainly needs such systems. But a system that makes false promises of stability, fosters irresponsible fiscal policies, and opens the door to crime and corruption is not what the world needs. We should oppose it.