Journal of Financial Market Infrastructures
ISSN:
2049-5404 (print)
2049-5412 (online)
Editor-in-chief: Manmohan Singh
Need to know
- We put forward an analogy between stablecoins and offshore dollars: on-chain is like offshore.
- The primitive character of existing on-chain liquidity mechanisms to support stablecoins’ promise is revealed.
- Liquidity, not solvency, is the issue confronting par settlement.
Abstract
This paper presents a money view analysis of the recent crypto innovation of stablecoins, which have seen a remarkable rise as well as some spectacular collapses. By analogizing on-chain with offshore, and developing an extended analogy of stablecoins with Eurodollars, we reveal the primitive character of the existing on-chain liquidity mechanisms that support the promise of par settlement by existing on-chain stablecoin models. Liquidity, not solvency, is the issue confronted by par settlement.
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