IBM is using the Stellar blockchain to explore stablecoins. Banking and insurance complications remain.
On Tuesday, Jesse Lund, IBM's vice president of global blockchain market development, wrote a post[1] on the company's website about stablecoins. "As the name suggests, a stable coin is a digital token that has low price volatility because it is pegged to an underlying fiat currency," he wrote. "Thus, it would work well for practical applications involving payments on a blockchain network as a store of value, a medium of exchange and unit of accounting for routine and everyday transactions of both large and small values."
Proponents claim that stablecoins might be more robust against fraudulent activity and enable faster settlements than current monetary infrastructure. Unfortunately, for now, much of this is fiercely philosophical. By most accounts, we have yet to see a functional stablecoin (sorry, Tether[2]).
In fact, some believe that a real stablecoin will never exist. This is because the value of money isn't just a function of adoption and socialization. A currency's "value" relies on widespread trust as well as the intricacies of monetary policy (e.g., interest rates) and fiscal policy (e.g., taxes). The magnificent challenge of creating a stablecoin could be compared to the pursuit of conversational artificial intelligence – it remains a holy grail for developers.
However, it's not clear that stablecoins are all that useful. Even if they enable price certainty, why would a consumer/business prefer a stablecoin transaction over a fiat transaction? Even if a stablecoin augments speed and transparency on the financial side of a transaction, where's the certainty about the good or service that's provided? It might be smarter to make a purchase using a normal credit card, just in case the counterparty doesn't deliver and you
