SMM (ed. 13) Stablecoins - bitcoin's Pandora's box

SMM (ed13) Stablecoins - bitcoin's pandora's box

August 13, 2021

Friends,

I am back at my desk in Los Angeles after 5 weeks away visiting family, friends and associates in London, Johannesburg, Cape Town and Franschoek. It has been an intense but deeply rewarding time. There is so much to be grateful for and celebrate despite the inevitable challenges presented by life in the 2020s. I am most grateful for relationships. The support and insights offered on both the personal and professional front has been immense.

After working on the road for the past 5 weeks, I am excited to be back in one place for a while with the focus and motivation to deliver. I am looking forward to building and collaborating with all of you.

Onwards and upwards!

This month I thought we should touch on something a little different, stablecoins. These crypto dollars are NOT digital sound money, but they are an important and revealing innovation. With deep liquidity, lightning-fast settlement, and dramatic user growth stablecoins pose important questions for regulators and traditional financial markets.

TLDR:

Stablecoins present both challenges and opportunities to regulators, the financial system, and investors. The unfolding regulation of these instruments provides insights for the clash between centralized traditional finance and the new decentralized financial infrastructure of the bitcoin era. I expect centralised stablecoins will be regulated, legitimized and drive adoption into the more powerful decentralized monetary technologies like bitcoin. Eventually they could pose systemic risks for traditional centralized finance.

Full Article: https://soundmoneymacro.com/?p=2805

Summary

  • Stablecoin supply has grown from $20bn to almost $120bn in the past year

  • Instant stablecoin settlement enhances capital efficiency

  • Collateralised stablecoins are a stark contrast vs. leveraged traditional finance

  • Central banks could be lured by stablecoin velocity

  • Stablecoins face towards decentralized bitcoin, but they remain centralized

  • Centralised stablecoins enhance govt KYC and AML efforts

  • Collateral risks could emerge if stablecoin growth continues unabated

  • Stablecoin settlement, yields and familiarity open pandora's box into decentralised technologies like bitcoin

Full Article: https://soundmoneymacro.com/?p=2805

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