Wall Street Journal: Stablecoins Are Essentially "Private Money" That Could Pose Risks to the Financial System

Odaily Planet Daily News: Although the GENIUS Act and the CLARITY Act are promoting the compliance of stablecoins, stablecoins are still essentially "private money" that could pose structural risks to the financial system.

The article points out that stablecoins aim to combine the stability of the US dollar with the payment efficiency of blockchain. However, because they operate on fragmented, private infrastructure, they lack the uniformity of the traditional dollar system. Although USDT and USDC are pegged to the US dollar, their prices can still deviate from $1.

Furthermore, stablecoin issuers have an incentive to boost returns by allocating funds to high-risk, low-liquidity assets. If the value of these assets declines, it could trigger a de-pegging event or a risk of concentrated redemptions. The article cites Chainalysis data, stating that stablecoins account for 84% of illicit crypto activity, primarily related to sanctions evasion and money laundering, while their use in real economic payments accounts for less than 1%.

The Wall Street Journal believes that stablecoins are repeating the path of "private money" experiments from the US "Free Banking Era" of the 19th century. In the future, they may need to accept stricter regulation like banks and achieve deeper integration with the central bank system. (Wall Street Journal)