Berkeley Professor Labels Stablecoins Non-viable
A recent analysis published September 11th, Barry Eichengreen, an economics professor at Berkeley, claims the notion of stablecoins, or digital assets linked to fiat currencies, are completely unviable. He stated that although upcoming market trends include currencies like Tether this does not confirm the viability of so called stablecoins.
Eichengreen's Perspective on Stablecoins
In addition, Eichengreen remarked that the volatility associated with tokens such as BTC directly affects their purchasing power making these digital currencies highly fickle and lack in stability. However the main purpose behind the notion of stablecoins aims to solve this problem by presenting a static value associated with fiat currencies such as dollars or even gold. The critique went on to describe Stablecoins as attractive in their ability to function as a store of value however such features don’t make stablecoins naturally viable.
The digital currency ecosystem at large has consistently been introducing new forms of stablecoins issued by traditional financial institutions. According to updates from Cointelegraph, this week regulators facilitated the launch of new stablecoins from Paxos, as well as other more famous tokens such as the Gemini Dollar and Winklevoss brother's new stable asset.
Previous to the aforementioned successful launches, August reports indicated that the Liechtenstein Bank also had intentions to create a stable coin of their own backed by Swiss-Franc currencies. Although these digital tokens are reigning in the financial world, in Eichengreen's perspective they fall under three main categories structured on the extensiveness of each token's security. Eichengreen segregates them as uncollateralized, partial collateral and full collateral. He believes each segment has its own weaknesses. The professor further concludes that despite the so called stability associated with stablecoins, it is not determine the scalability of such models or that governing authorities will favor them over other emerging currencies.