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A new BIS research paper finds of the 68 stablecoins 'pegged' to the value of a specific asset, not one of them has been able to maintain parity with their pegs at all times

Personal Finance / news
A new BIS research paper finds of the 68 stablecoins 'pegged' to the value of a specific asset, not one of them has been able to maintain parity with their pegs at all times

The 68 'stablecoins' in circulation today do not meet the "key criteria" for being a safe store of value and a trustworthy means of payment in the "real economy", according to a new report from the Bank for International Settlements (BIS).

A stablecoin is a type of cryptoasset that aims to stabilise its value relative to other conventional assets, including central bank money. One of the first was Tether, in 2014. Within a decade of the first stablecoin launch, the number of “active” stablecoins, ie those having a positive market capitalisation, grew to above 60, with Tether, USD Coin and Binance USD being the most prominent ones to date.

The report's authors Anneke Kosse, Marc Glowka, Ilaria Mattei and Tara Rice have examined whether stablecoins have stayed true to their name in terms of being “stable”.

The authors say that by classifying stablecoins into four distinct types, they show that, while stablecoins backed by fiat currency, commodities or other cryptoassets have generally been less volatile than traditional cryptoassets, not one of them has been able to maintain parity with its peg at all times.

"One thing is certain: a stablecoin that never breaks its peg has yet to emerge. The evidence suggests that, to date, not one of the current stablecoins assessed in this paper has been able to assure full price stability.

"This applies to all types of stablecoin, irrespective of their size or their type of reserve assets. Moreover, there is no guarantee that the stablecoin issuers have the assets required to be able to redeem the coins at all times.

"The lack of transparency regarding the availability and quality of these reserves may undermine trust in stablecoins’ credibility and their ability to maintain their peg.

"For these reasons, the stablecoins we see today do not live up to their name, nor do they meet the key criteria for being a safe store of value or a trustworthy means of payment for the real economy."

Our Reserve Bank (RBNZ) has done a significant amount of work on cryptoassets as part of its Future of Money programme. The RBNZ says it's not proposing regulation yet, but is increasing its monitoring of stablecoins and cryptoassets (cryptocurrencies), and suggests there could be "real advantages to harmonising cryptoasset regulation" globally. 

The RBNZ has also taken a particular interest in stablecoins and has previously warned that if there was to be a rapid and widespread uptake related to a stablecoin backed by foreign currencies, "there would be a potential risk of inadvertent ‘dollarisation’ where the money used in New Zealand (and domestic prices) would be denominated in foreign currency and not the New Zealand dollar".

Basel, Switzerland-based BIS was established in 1930, and is owned by 63 central banks, including the RBNZ. BIS describes its mission as to support central banks' pursuit of monetary and financial stability through international cooperation, and to act as a bank for central banks.

In the latest paper, the BIS authors say that given stablecoins are claimed to provide a stable alternative to other cryptoassets, they have a greater potential to become a widely used method of payment, store of value and unit of account.

'Significant turbulence'

"Yet, despite the lauded benefits, stablecoins have experienced significant turbulence, especially in 2022 and early 2023. In the first half of May 2022, the crypto ecosystem was shaken up by the crash of various cryptoassets, including Terra’s stablecoin TerraUSD, the third largest stablecoin at the time. A few months later, in November, the centralised crypto exchange FTX filed for bankruptcy and March 2023 saw the collapse of Silicon Valley Bank, a lender and custodian to many crypto service providers. These events had a discernible impact on the cryptoasset market, and they brought the growth of the stablecoin market to a halt."

The report says that to date, the majority of stablecoins have been pegged to a single asset, most typically sovereign currencies, such as the US dollar or euro, but also commodities such as gold or another cryptoasset. The information in the report is based on the status as of September 30, 2023 and contains information on 68 stablecoins, 20 of which are fiat-backed, 28 crypto-backed, seven commodity-backed and 13 unbacked.

"As the introduction of stablecoins approaches its tenth anniversary, many questions remain unanswered," the report authors say.

They say that to answer questions about the uses and users of stablecoins, significant data gaps must first be addressed.

"The analysis in this paper is based mainly on information from commercial data providers and stablecoins’ websites. More granular data are required to better understand who uses stablecoins, for which activities and purposes, and how often. While blockchain transactions are, in theory, transparent, information on actual usage is difficult to obtain.

"Moreover, stablecoin issuers typically do not provide public information on the usage of their stablecoins. An important consequence of this data gap is that the true risks of stablecoins may be underestimated," they say.

"Not only does this hamper authorities’ ability to take informed decisions and develop evidence-based policies, but it also makes it difficult for them to intervene, if necessary, in the case of a run or other loss-of-confidence events that may harm consumers."

'Appropriate regulation and supervision essential'

The report says appropriate regulation and supervision are essential, not only to serve as a legal basis for the collection of more detailed data, but also to prevent stablecoins from "compromising the safety and efficiency of payments and the financial system more broadly".

"Important steps have already been taken in this direction. The Bank for International Settlements’ Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) have been engaged in extensive international policy and standard-setting work on the regulation, supervision and oversight of stablecoin arrangements."

The report authors say that despite stablecoins "not being truly stable", they are still around, and new ones are still being issued.

They say the global regulatory community "cannot afford to just let crypto 'burn out'".

"Continued monitoring with vigilance and future-proofing policy are in order, given the rapidly evolving and elusive nature of this market."

To address the challenges related to stablecoins, regulation alone may not be sufficient, the report says.

"This paper covered a number of shortcomings but was not exhaustive in its reviews. Other shortcomings include aspects related to competition, consumer protection, data privacy and anti-money laundering/combating the financing of terrorism. Further, stablecoins could undermine the singleness of money and lead to a fragmented and fragile monetary system.

"To address these challenges in a holistic manner, regulation alone may not suffice. Moreover, not all jurisdictions will seek to regulate stablecoins. In fact, there are divergent policy approaches to stablecoins across jurisdictions: some jurisdictions have made it clear that they will not accept stablecoins because of the potential risks to monetary sovereignty, financial stability and seigniorage income; others choose to regulate stablecoins to address these risks, acknowledging the potential roles that stablecoins and their underlying technology could play in future payment ecosystems in their jurisdictions."

'Complementary efforts'

The report says complementary private or public sector efforts, such as improvements in existing payment infrastructures and exploration or the development of central bank digital currency (CBDC), may help to offer the legitimate benefits in payments and financial services that the public seeks.

"For example, if the use of stablecoins is mainly driven by a demand for cheaper cross-border payments, similar benefits may be offered by interlinking today’s fast payment systems.

"If stablecoins are used for reasons of programmability and instant settlement, then CBDCs could satisfy this demand while offering the safety of central bank money."

Further analytical work on the market structure of stablecoins, their stabilisation mechanisms and the key drivers for their adoption will provide a basis for robust policy work, the report says.

"Jurisdictions must move quickly to (i) work through international standard-setting bodies to continue to improve the guidance or standards on stablecoins, including on international cooperation; (ii) determine their policy stance (regulate or ban); (iii) if regulating, then act expeditiously to put in place a holistic regulatory framework, including the means to fill the substantial data gaps."

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This is why indexing stablecoins at the DeFi layer is ultimately the way to go. 

I've written on this topic, but as an example if the big four banks issued their own stablecoins directly onchain, these could be aggregated into an index NZD (Multi-Bank Digital Currency instead of a CBDC).

That way, rather than the customer losing 100% of their money in the event of a bank failure, they'd lose only 25%.

Not only this, but automated, private insurance incentives can plug the hole for customers within hours, before any of the issuing institutions are able to respond.

These are important innovations conducive to better financial stability. While I agree that asset-backed is the way to go for stablecoins issued by a single institution (crypto-backed are more in the space of innovating on securitisation), I do pushback back at the attempt to present transparent cryptographic systems as somehow regressive for consumers compared to paper-promise institutions.


Banks have a deposit guarantee though so most people do not loose 100%. Given the value of bank deposits over 90% would loose nothing. There is no deposit guarantee and no regulations for cryptocurrency and you think that makes it safer. Take a look at the rate of exchange failure compared to bank failure or even just look at the largest cryptocurrency exchanges. How well were customers treated at FTX. Or do you just have a blind spot to reality. Here is a clue most lost 100% (those who could not pull out in time).

There are very few who use cryptocurrency capable of using it without exchanges at key points of the processes. Unfortunately this means that the loss of a single exchange can result in 100% customer losses. This is from a software engineer who was involved in the early tech promotion and trading but who can also judge it from a technical stand point and social behaviour one.

It is very easy to market cryptocurrency except most marketing literally is scams and when people become more educated against scams or experienced in trading they generally find there is little to no utility to cryptocurrency trading compared to most other technical services for investment. The utility was never how safe cryptocurrency was because in general it is less safe than a worm on a fishhook. It actually requires people to expose themselves to higher levels of risks, most of which cannot be mitigated because there is no governing body or standards. Even the courts have been very lax at justice in cases of pure fraudulent and illegal theft.



'Banks have a deposit guarantee'. No they don't, though legislation to provide cover of $100,000 per person per qualifying institution was put through by the last government and should be active by 2024 or earlier.


Did you think it is only local I am talking about. cute. You look locally for a single source of banking but then want to preach and advertise for a international cryptocurrency. Yeah take a little due diligence and please do your research for all financial options, looking in particular at risk, security and regulations. Then please please please do not try to scam others with an unregulated well known high risk, poor inaccessible investment "option" that is more often then not only tradable through fraudulent providers (especially given the data of customer losses through exchanges in comparison to ones still operating).

It is fun though to watch market manipulation and stable coins falter and get used as scams in real time. Normally these kind of things that would take millions and years to uncover, never being so blatant, stupid and childish as FTX or even our local exchange failures. Which any techie could see was bad a mile away (being a part of the industry & the initial supporters in NZ means it is easy to see the pitfalls). Sadly most customers are forced to both use exchanges as sources and means of trading which really does cause them undue amounts of risk. A experienced cryptocurrency trader would never use an exchange, but the options to do that via stable coins is highly limited. At some point a server highly susceptible to fraud is handling the coins and there is no recourse. None. At best you can kiss goodbye when anything goes wrong and don't even get started on the issues with processing refunds.


Turkey's not voting for Christmas....


Ironically, and something the BIS are quite silent on.  Some of these depegs were driven because of the US banking melt a run on the bank.

I personally think that conceptualising stablecoins as fiat clones isn't quite right. I would see them more as another currency pair with a close par value, whos mechanations are driven by whatever sentiment is happening in their own market.  

Whatever, what is clear though is that stablecoins offer a huge array of benefits over traditional banking systems, not the least of which is cost.  


Some of these depegs were driven because of the US banking melt a run on the bank.

Yes, this is when the depeg of USDC happened from memory and the depeg was based around fears surrounding SVB. Actually, USDC corrected itself quite quickly. 


Tether is a US dollar proxy (which is backed by US treasuries) that is used by millions of people who have no access to a bank who still cling to the brand value of the USD. Tether is providing an amazing service banking the unbanked. 

Tether is basically the only decent use-case for cryptocurrencies outside of bitcoin. 


Except Tether is completely inaccessible to most the unbanked. It is far far worse than traditional banks and insecure for most of its users. To social anarchists and libertarians sure some like it but for those who literally have access denied to banking services or cannot use most of the services Tether is even worse.

Have a thought as to the key drivers to loss of access to banking and why most online services are completely inaccessible. The key is in the word: accessibility.


Tell that to the people of Argentina. 


And? The people of Argentina who literally did not have access to banking services worldwide still do not have access to Tether. Telling that you use only people who already had access to banking services and still did in your example, they had options and would never be without banking unless they chose to be which means they can never be classed as unbanked. You did not get the clue huh. Lookup web accessibility. Now I have literally no hope you can even perform a dictionary search so your chances at knowing what accessibility means in terms of financial services is right now, lets use a kind phrase, and say slim to none. In reality it is just really sad you got to this point without education needed to do basic lookups.


"Yet, despite the lauded benefits, stablecoins have experienced significant turbulence, especially in 2022 and early 2023."

The BIS then proceeds to give the example of algo-derived stablecoin Terra. I also remember when USDC de-pegged up to approx 10% of the fiat market spot rate. Most of the time, stablecoins have "not" experienced turbulence. 

The Monetary Authority of Singapore has already launched its own regulatory framework for stablecoins. The BIS needs to perhaps look to others for guidance if they're not taking any meaningful lead.…