Economics professor Eswar Prasad, author of the book “The Future of Money: How the Digital Revolution is Changing Currencies and Finance”, explores the impact of stablecoins on the global financial system in his report for the International Monetary Fund.
Eswar Prasad emphasizes that cryptocurrencies were originally created with the intention of reducing dependence on central banks and large financial institutions. Bitcoin and similar crypto-assets, utilizing blockchain, were supposed to provide users with direct access to financial services without intermediaries.
However, high volatility and limited capacity for processing a large number of low-cost transactions have made cryptocurrencies less practical for everyday use.
In response to these shortcomings, stablecoins emerged—digital assets whose value is pegged to more stable reserves, such as national currencies or government bonds. This makes them a more reliable medium of exchange compared to traditional cryptocurrencies.
The professor cites examples of dollar-backed stablecoins, such as USDT and USDC.
“Dollar-backed stablecoins are the most common in the world. Ultimately, they may indirectly strengthen the dollar's position in the global payment system,” notes Eswar Prasad.
In his view, stablecoins can reinforce the existing international currency structure, enhancing the influence of countries with strong reserve currencies.
At the same time, countries with weaker financial systems may find themselves at a disadvantage.
“Such states, which have regulatory constraints, may be forced to comply with rules set by stronger nations,” the professor believes.
Despite the potential advantages, Prasad warns that stablecoins could lead to even greater concentration of financial power and increased global instability.
“Stablecoins serve an important function; however, they may become the foundation for a new financial order that does not promote innovation and competition as intended, but rather could exacerbate instability,” concludes Eswar Prasad.
