Stablecoins

 Context

• The global market capitalization of stablecoins has more than doubled in the past 18 months, reaching nearly $280 billion, raising new regulatory and financial stability concerns.

What are Stablecoins?

• A class of cryptocurrencies designed to maintain a stable value by pegging to underlying assets such as:
• Fiat currencies (e.g., USD, Euro),
• Commodities (e.g., gold),
• Other cryptocurrencies, or
• Algorithmic mechanisms.
• Difference from CBDCs:
• CBDCs are sovereign, central-bank issued digital currencies.
• Stablecoins are privately issued and may also be pegged to foreign currencies.

Global Scenario

• United States: Enacted the Genius Act, mandating:
• Full backing of stablecoins by liquid assets (cash, T-bills).
• Mandatory disclosures for transparency.
• Japan & Singapore: Introduced targeted regulatory frameworks for stablecoins.
• China: While prioritizing its sovereign digital yuan, it is also exploring yuan-backed stablecoins.